“Most money in the modern economy is in the form of bank deposits, which are created by commercial banks themselves… When a bank makes a loan to one of its customers it simply credits the customer’s account with a higher deposit balance. At that instant, new money is created…”
the relationship between reserves and loans typically operates in the reverse way to that described in some economics textbooks. Banks first decide how much to lend depending on the profitable lending opportunities available to them…It is these lending decisions that determine how many bank deposits are created by the banking system. The amount of bank deposits in turn influences how much central bank money banks want to hold in reserve (to meet withdrawals by the public, make payments to other banks, or meet regulatory liquidity requirements), which is then, in normal times, supplied on demand by the Bank of England
The sectoral balance equation gives the *impression* that if the government runs a surplus of $X during one year then the money supply available to the private sector to use must be whatever it was at the start of the year minus $X.
But this is not true. Fractional reserve banking allows the private sector to increase or decrease the money supply independently of whatever the government does. So the *contribution* of the government's policy to the money supply may indeed be -X, but the size of the private sector's money supply could have changed by any amount.
Tweet 1. We’ve given the power to create money to the banks, with no accountability Banks create money when they make loans, which means that they effectively control where newly created money goes to in the economy.
Tweet Ben Dyson, founder of Positive Money presenting at Meaning Conference 2014 on 18th November in Brighton. He got into the nitty gritty of how the current process for money creation is causing a rise in poverty, instability and inequality.
Professor Steve Keen is one of the few who accurately predicted there would be a major financial crisis before the 2008 crash. He discusses why the economic ‘recovery’ will be short-lived, house prices and how to curb stock market speculation.
Tweet Sign the petition! Tell the future Prime Minister of the UK that money creation should only be used in the public interest. We need to know your name. Please check your email is valid. not in the UK?
The Banking Act of 1933 ( Pub.L. 73-66, 48 Stat. 162, enacted June 16, 1933) was a statute enacted by the United States Congress that established the Federal Deposit Insurance Corporation (FDIC) and imposed various other banking reforms. The entire law is often referred to as the Glass-Steagall Act, after its Congressional sponsors, Senator Carter Glass ( D) of Virginia, and Representative Henry B.
Tweet The Green Party of England and Wales made history by joining the US Green Party in calling for an end to the private creation of money by banks at their conference (Sept 13-16). After a debate on the motion at … Continue reading →
Queue Politely, the producers of the monetary reform documentary “97% Owned” have produced a new documentary: “Princes of the Yen” is film about the power of central banks and the transformation of the economy, based on the book of the same …...
BOOM BUST BOOM: MINSKY AT THE MOVIES By L. Randall Wray I highly recommend a movie to be released next year (that is, the year that begins next week). Terry Jones, of Monty Python fame, is one of the key developers of the film.