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While all the TV news cameras point at politicians in Westminster, the power to create money gives the banking sector more power than government. Here’s why it’s undemocratic to allow banks to create the nation’s money:

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. That means banks have the power to shape the economy.

They’ve used this power to push up house prices, inflate speculative financial bubbles, and starve small businesses of investment. They have no legal obligation to use this massive power in the interests of society as a whole, and we have no way of holding them accountable when they use it badly.

2. This power to create money is concentrated with just a few people at the top of the biggest banks

Today, approximately 85% of the UK’s money exists on the books of just five banks. These five banks are controlled by just 78 board members, who take the key decisions about how much money is created, and what that money is used for.

This is a huge amount of power concentrated in very few hands, with next to no transparency or accountability to wider society. Instead, the people that run banks are primarily concerned with increasing the profitability of the bank, by increasing their lending (and therefore the amount of money they create) as quickly as possible.

It’s dangerous and undemocratic to leave this much power in the hands of people who have no accountability to society – the financial crisis has shown how severe the consequences of doing this can be.

3. Banks have more ‘spending power’ than the government

In the 5 years running up to the start of the financial crisis, the total amount of loans approved by the banks came to a total of £2.9 trillion. Over that same period, the government spent a total of £2.1 trillion. So when banks are able to create money when they make loans, they can end up with more ‘spending power’ to shape the economy than the whole of our elected government.1

Proportional Money Creation

4. There was never any democratic decision to give banks the power to create money

When the government talks about privatising parts of the health service, there is a huge public debate and arguments on all sides. But there has never been a debate or vote in parliament to give the banks the power to create money. In fact, the opposite has happened: in 1844 parliament voted to stop banks creating paper moneybut that law left out bank deposits. Today 97% of all money is made up of bank deposits (i.e. electronic money). Most MPs are unaware that the power to create money has shifted to the banks.

The power to create money affects almost every aspect of our society, so it’s worrying that we’ve allowed it to fall into the hands of banks with no debate in parliament or the press.


1. Source: Bank of England Statistical Database

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  • Rationality

    I’ve got an idea. Let’s give the power to create money to a select group within an appointed government board the power to “create money”. That way, we could have a small group of untested populists making decisions about everyone’s finances instead of a group of time tested bankers that will lose the shirts that they EARNED if they make the wrong investment. Get real. The problem is not the lending, it is the repayment. Let banks and their investors lose their money if it is invesed poorly, and suddenly you’ll find they get a lot more cautious about how they lend it out. No more bail outs from the public by printing more currency or having a government take on debt that it knows it cannot possibly repay.