The politicians are talking about restructuring the banking industry; this is crazy. Regulators and politicians have clearly demonstrated they know little about how banking works, so the thought that they could design a system which would make it let work better seems, at best, optimistic.
The government is currently almost exactly mirroring what got the banks in trouble in the first place all those years ago. It is over-leveraging the country’s balance sheet, gambling on a positive future outcome with other people’s money, trying to finance long-term obligations with short term liquidity, all the whilst pillaging stakeholders with rule changes and making phoney promises.
The scale by which the government is rigging interest rates in its favour would make even a Barclays banker blush.
So what are the chances of this crowd of politicians re-engineering the banking industry into a more benign shape? None. They will surely make things worse; after all, they seem blissfully aware of the core problem, one which they themselves suffer from.
In light of all this, the core problem for Britain and the one facing our personal finances is financial illiteracy. The whole rotten situation we find ourselves in is because most people don’t have the foggiest idea what the government is doing wrong.
There will always be predators in the jungle of money and the government simply does not educate its people on how to survive in it, let alone prosper.
The edifice of our financial services industry, and for that matter the economy, rests on the foundation of personal finance, yet our children are sent into the adult world knowing little or nothing of it. No wonder disaster follows.
A cynic might suggest that financial illiteracy is allowed if it makes it easy to fleece the electorate at budget time.
However, the parlous state of British banking would simply not exist if our population had a clue about money. The customer would simply have not put up with the kinds of financial services that led to this ruinous situation.
So many of the bubbles and scandal of the last ten years would have been avoided if the targets of these financial scams were savvy enough to understand what was going on.
For example, if people had received proper financial education there would not have been a PPI scandal. Customers would have simply refused to take the product, knowing it was a rip-off. I
A 120 per cent interest-only mortgages? No thanks, a little personal finance education will tell a borrower that’s a gamble not worth taking.
A 40 per cent APR store card? Forget it, only a financially illiterate would step into that minefield.
Yet today you are left wondering what kind of financially innumerate country could allow the evil of 1 per cent-a-day lenders to exist, knowing that interest rate, aimed at the financially desperate, turns £1,000 of debt into £1 billion, in just under four years.
Are the same regulators that allow, in broad daylight, these blatantly evil lending practices to flourish, going to be the same people to rebuild the incredibly complex and obscure mainstream banking world?
If the government wants to improve the banking system and rescue the economy it needs to start fixing the root causes, ignorance about finance and money.
Money matters should be taught from an early age. But you can be assured the idea will be considered as outrageous. Money is after all the root of all evil.
You may never need chemistry, physics or French after you leave school, but the thought that these subjects could become as obscure in the class room as Latin would be thought of as unthinkable. No one’s life would be shockingly blighted by the lack of schooling in geography.
Yet today the United Kingdom is filled with families suffering agony snared in financial traps they have fallen foul of because of their ignorance of the basics of personal finance.
What is more, our economy has grown twisted and exploitative as it drags down and feeds off the financially blind.
If the government wishes to fix the banks it needs to teach the next generation the financial facts of life. Then the customers will fix the banks by making the right decisions and forcing the banks to supply the right products in the right way.
Only when the customer is educated in financial matters will we get the banking system we deserve.
l Clem Chambers is chief executive of stocks and shares website www.advfn.com
Search for a job
Search for a car
Search for a house
Weather for Edinburgh
Friday 24 May 2013
Temperature: 3 C to 13 C
Wind Speed: 20 mph
Wind direction: North east
Temperature: 7 C to 17 C
Wind Speed: 13 mph
Wind direction: West