In a recent FT Alphaville article Izabella Kaminska argues that it is ‘naïve’ to attempt to constrain banks’ ability to create money, because this will only prompt other financial sector firms (‘shadow banks’) to create other forms of money that could be used as a substitute for money created by the state. Naturally, we disagree. Kaminska’s article misses some key points of economic history, and also overlooks other reasons why it is unlikely that substitutes for money will compete with state-created money.
The chancellor, George Osborne, has set out dramatic plans to move Britain from the red into the black that will see public spending as a percentage of GDP fall to its lowest level since the 1930s and could require cuts in non-protected departments such as police, local government and justice amounting to a further £60bn by 2019-20, reads the Guardian, 4th Dec 2014.
Where does money come from? Printing it yourself, unsurprisingly, is illegal. But in today's digital society, creating money has less and less to do with the printing of notes or minting of coins, reads the article in Deutsche Welle, 28th November 2014.
Abandon helicopters. Use bombers. Bomb Germany, France, Italy, Greece, the entire eurozone. Bomb them with banknotes, cash, anything to boost demand. The money must go straight to households, not to banks. Banks have had their day and miserably failed to spend, argues Simon Jenkins in the Guardian, 26th Nov 2014