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Four steps to making a fortune – and giving it all to Britain | Joris Luyendijk

Let me start up my own bank and I’ll show you what I can do with it. Quantitative what?

In May of last year I moved from Amsterdam to this wonderful country to write this blog about the world of finance. I like it here and now I want to give something back. I have therefore decided to solve one of the UK’s pressing problems.

Here’s the plan in four easy steps. First thing tomorrow morning I am going to the Bank of England to tell them I am starting my own bank. This ought not to be too difficult.

Free market theory tells us that barriers to entry in a market must be low so new participants are encouraged to enter. If a baker on Baker Street is making huge profits, others should be able to open up bakeries in the area. This increases competition and rewards efficiency, driving down prices and benefiting consumers.

Finance sits at the apex of this free market system, so surely they’ll let me in. All the more so because as chief executive of my bank I will not engage in any, repeat any, risky activities. That’s step two of the plan. Once established, my bank will simply go to the Bank of England and say: can you please give me lots of billions for your advertised rate of 0.5%?

That’s right. It took me a little while to get my mind around this, but some people in this wonderful country can do this. They have access to money that is almost free. These people are called the bankers. Soon I am going to be one of them.

Now you may think that since they pretty much completely failed to foresee, let alone prevent the financial crisis, central bankers, such as those at the Bank of England, must be stupid and they will just hand me my billions, no questions asked. You would be wrong. People in central banks are actually incredibly learned and sophisticated, and they will want to know: where’s your collateral? Who guarantees we are going to get all that money back?

This is where step three kicks in. I will tell the Bank of England that I am taking all of those billions to the UK government and … lend it to them! What could be safer than investing my money in UK government bonds that are guaranteed by … the very same central bank that lends the money to me?

These days the government can borrow from capital markets for a little over 2%, meaning I stand to make at least 1.5% for every billion they borrow from me. Nice work if you can get it! There are people in this country who get it. They are called the bankers. Soon I am going to be one of them.

On to step four. This year alone the government is estimated by the BBC’s Robert Peston to need to borrow about £260bn. If it does all its lending with my bank, I stand to make 1.5% of £260bn. That’s £3.9bn.

This money I will then give back to … the UK government! At no charge! Simply as a token of my appreciation for your country’s hospitality. Next year we’ll do the same thing, and the year after that. Hell, the government may decide it wants to borrow even more from my bank, given that I charge only 0.5%. The sky is the limit when you are in a helicopter dumping freshly printed money from your window.

Three point nine billion pounds involves a lot of zeros and one may ask why nobody thought of this before. My guess is that we have all been put to sleep by terms like “historically low interest rates”. I mean, who would not want those? Or take the words “quantitative easing”. Translated into everyday language they mean “printing money and giving it to banks basically for free”.

But that’s not at all how “quantitative easing” sounds. To an average person like me words that have “quant” in them reactivate a long-buried inferiority complex to do with maths. Anyone who hasn’t tuned out after those intimidating four syllables then reads the soothing term “easing”.

Who could be against that?

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