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Would stripping banks of their power to create money cause a shortage of money, high unemployment and an economic decline? (Report)

Screenshot 2015-01-15 11.26.28

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”.

Is it possible to stop banks creating money? Or would shadow banks just take over?

FT alphaville public money

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.

Marco SabaYou have to monitor very strictly the international clearing systems. During a French investigation on Clearstream it emerged as much as 17,000 a/c UNPUBLISHED - many owned directly by central banks - for unclear purposes... it was (and it IS) mostly money laundering by the very same institutions th...

December 2014

RJNo Bob would not borrow £500,000 to give it back to lloyds (or another bank) Bob would say use the money to buy a house. The money woudl then move to say Janet (the house seller) who may buy another house or invest the money with Lloyds or another bank. Maybe short term until she finds the right h...

December 2014

plainmoneyUnder the PM system, suppose that I start with £500,000 in my transaction account at Lloyds, and I lend it to them at say 3% p.a. I move the £500,000 into my Lloyds investment account and I forego access to it. Lloyds has a customer Bob who borrows the £500,000 from them at say 5% and the money a...

December 2014
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Increasing Competition in Payment Services (Report)

competition in payment services

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.

How the current process of money creation is causing a rise in poverty, instability and inequality (Video)

ben meaning conf

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. And challenged the audience to imagine what a modern and sustainable system could look like.

Liability could be issued as zero-coupon irredeemable bonds

FT letter Fran

Sir, Simon Ward (Letters, November 13) states that Adair Turner’s proposal to fund government spending with newly created money “would involve the creation of more Bank of England reserves, which represent a liability of the state and bear interest”. But there is no reason that the new liability would have to bear interest, since it could be issued as zero-coupon irredeemable bonds, reads the letter by Fran Boait in Financial Times, 16th Nov 2014.

GuyHarper"With regards to reading the proposal - I may be mistaken, but I think I may be the first person to suggest this parallel system of reserve accounts. I'd be happy to find out someone else has had the idea and fleshed it out in further detail but I haven't seen it anywhere so far :)"I assumed this i...

November 2014

dannyboyFirstly, I think this proposal (which I was able to outline in a couple of paragraphs) is orders of magnitude less complex than reams of new regulations that are being implemented in an attempt to patch the existing system.If you are worried about banks trying to offload these new reserves back to t...

November 2014

RJIt would create an unnecessary level of complexity. And the banks would likely just use these nil interest reserves to settle with the treasury (for our tax payments) the very same day. A better suggestion would be just to increase the required reserve holdings to back deposits held....

November 2014
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