The Bank of England has set up a new research hub, called "One Bank Research", which is tasked with looking at some of the fundamental question about the future of money and banking. In the past, the Bank's research has often had the aim of backing up the policy decisions of the Governor or the MPC. The One Bank Research initiative's agenda, released last week, asks questions that already start to challenge the Bank's existing policies.
Would stripping banks of their power to create money cause a shortage of money, high unemployment and an economic decline? (Report)
Some economists and commentators have claimed that Positive Money’s proposals for a sovereign money system, in which banks are not permitted to create money, would leave the economy with a money and credit supply that is rigid, inflexible and unresponsive to the needs of the wider economy. According to one critic, such a system would result in “a shortage of money, high unemployment and low economic activity”.
Since the crisis the government has been keen to encourage more competition between banks. Their main focus has been making it easier for people to switch their current account between different banks. But we think this misses a bigger opportunity: there is much more potential for competition from technology firms and mobile app developers, who could develop current/checking accounts and more user-friendly ways of handling your money and payments.
Last Thursday, the UK parliament debated the issue of “money creation and society”. This was a backbench debate, which means that no vote is taken at the end and no laws are changed; it is simply an opportunity to discuss important policy issues outside of the government’s agenda.