Automation is a bless and a curse. On one hand it liberates humans from dangerous, monotonous and boring work, while on the other hand it takes jobs from people and hence their source of income. The latter is not without consequences. Continue reading Automation: challenges and solutions
Many people use the words “jail” and “prison” interchangeably. The distinction between this two typed of deprivation of liberty by the government is, however quite simple. Jail is the place were people are held before and during their trial. Prison is the place were we put convicted criminals.
When the police arrests someone, they will usually bring the arrested person first to the police station for [further] questioning. This stage usually takes several hours to a few days, and when it considered necessary to keep this person in custody for a longer period of time, the arrested will be transferred to jail.
The main purpose of keeping suspects in jail is to ensure they will show up in court, as it is difficult to convict people in absentia in many countries. Locking people up is, however, a drastic measure, in particular if one is suspected of a relatively minor crime.
There is a tension between jail and the presumption of innocence. This principle states that people should be held innocent unless proven otherwise. For liberal democracies this principle is of great importance as it protects citizens from arbitrary imprisonment. Before the authorities should be allowed to put you in prison, or to give you whatever punishment, they government should prove your guilt.
Because of this tension between protecting the rights of innocents on one hand and the desire to prevent suspects from fleeing the country, the concept of bail has been introduced. Bail is a sum of money one has to pay to leave jail, and this money is returned once one shows up in court (in your own trial). The height of this sum is set by the judge at a preliminary hearing.
In most cases suspects are allowed to leave jail if they pay bail, as most criminal court cases only involve minor crimes. There are, however, people who cannot pay bail, regardless of how low the bail is set. This is frustrating for poor suspects who are actually innocent, they are punished twice just for being poor as they are robbed of their liberty without due cause.
Bail is invented in more primitive ages, when technology was far less developed than today. Nowadays, we can prevent suspects from fleeing the country by electronic monitoring or in more extreme case with electronic house arrest. Hence in our opinion bail is outdated and should be abolished. Instead we are in favour of the following procedure:
At a pre-trial hearing the judge(s) should the decide whether a suspect should remain in jail (there are legitimate reasons to keep suspects in jail) or whether (s)he could await the trial in liberty. In the latter case it should be decided whether an additional measurements such electronic monitoring will be imposed. But in any way, if it is not necessary to remain in jail a suspect will be released regardless of his or her financial position.
Intro and recapping
In part two of our series on monetary reform we briefly discussed the role of banks within the Mordan banking system. There we argued against fractional reserve banking, and to distinguish between on demand deposits and time deposits. The difference between these two types of deposit, is that in the former case the account holder can withdrawn his money from this deposit at any time, whilst in the latter case the account holder deposits his money to the bank for a certain period of time, during which he can’t withdraw his deposits.
Subsequently, we argued that banks should only allowed to lend the money from the time deposits, but not from the demand deposits. In technical terms we can see that time deposits are loans, more precisely a mutuum, from savers to the bank. And demand deposits are just money given to the bank for save keeping.
In this post we will give a further discussion of the Mordan banking system.
What are banks?
The term “bank” covers a whole lot of different kinds of financial institutions, hence it’s necessary to specify several types of banks. First we should make a distinction between retail and investment banks. Retail banks offer financial services to consumers rather than to corporations. Investment banks are usually involved in raising capital for corporations in other ways than by providing loans.
Retail banks offer a wide ranges of services to consumers and businesses: save keeping of money, facilitating financial transactions, accepting savings from and providing loans to the public. It’s perfectly possible to separate these functions in separate banks, saving banks typically only perform the last two function. And we can also imagine a bank which only accept demand deposits and facilitate transactions (in return for a fee), we could call such bank a transaction bank.
Many retail banks also offer asset management to wealthy clients, but we believe that asset management should be separated from the ordinary banking.
Organization of the new banking system
We propose a strict separation between investment banks and retail banks. This means a total ban on so-called universal banks. Practically investment banks are prohibited from offering retail banking services, and vice versa. In order to maintain this prohibition investment and retail bank should not be allowed to be united in any way.
Besides we also propose a strict separation between banking and insurance companies (we will cover insurances in another post). It’s nowadays a common practice for banks to sell insurance policies in addition to their banking services, this is mostly only for the purpose of raising more revenue for the bank. We believe that it’s in the interest of the consumers if banking and insurances are clearly separated from each other.
Currently most banks are stock companies, owned by their shareholders. Consequently banks have more incentives to serve the interests of their shareholders rather of the interests of their clients. Therefore we propose that all retail banks should be run as consumer cooperatives, i.e. only cooperative should be able to obtain a retail banking license.
Not only is this proposal in line with our commitment to a cooperative economy, but also because a cooperative bank is owned by its own clients, such a bank will pursue the interests of its clients. Additionally cooperative banks are by their very nature protected against hostile take overs. Hostile take overs have a disruptive effect on the financial sector and hence on the economy.
The obligation of being a cooperative will not apply to investment banks or asset managers.
Of course these rules have to be enforced, there we propose the establishment of the Mordan Financial Services Authority (MFSA). This supervisory agency will be separate from both the National Monetary Authority and the MFK. The MFSA will supervise the entire Mordan financial sector, it will license banks and can retract those, and quite importantly it will have the authority to arrest bankers for noncompliance with the law.