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October 7, 2011


Download the Foreword and Overview for Free

Where Does Money Come From?, co-authored by Positive Money’s resident expert Andrew Jackson, explains exactly how money is created in the UK, based on over 500 original documents from the Bank of England and other banking authorities. With a foreword by one of the leading authorities in banking, Prof Charles Goodhart, this is the most comprehensive and authoritative guide to how money is created ever published, and reveals that most of the textbooks are very much out of date.

£14.99 plus £2.50 postage within the UK, or £4.50 with international shipping

Two of the authors, Josh Ryan-Collins and Tony Greenham from the New Economics Foundation, discuss the book and its findings below:

There is widespread misunderstanding of how new money is created. This
book examines the workings of the UK monetary system and concludes that
the most useful description is that new money is created by commercial banks
when they extend or create credit, either through making loans or buying
existing assets. In creating credit, banks simultaneously create deposits in our
bank accounts, which, to all intents and purposes, is money.

Many people would be surprised to learn that even among bankers,
economists, and policymakers, there is no common understanding of how
new money is created. This is a problem for two main reasons. First, in the
absence of this understanding, attempts at banking reform are more likely
to fail. Second, the creation of new money and the allocation of purchasing
power are a vital economic function and highly profitable. This is therefore a
matter of significant public interest and not an obscure technocratic debate.
Greater clarity and transparency about this could improve both the democratic
legitimacy of the banking system and our economic prospects.

£14.99 plus £2.50 postage within the UK, or £4.50 with international shipping

Defining money is surprisingly difficult. We cut through the tangled historical
and theoretical debate to identify that anything widely accepted as payment,
particularly by the government as payment of tax, is, to all intents and purpose,
money. This includes bank credit because although an IOU from a friend is
not acceptable at the tax office or in the local shop, an IOU from a bank most
definitely is.

We identify that the UK’s national currency exists in three main forms, the
second two of which exist in electronic form:

Cash – banknotes and coins.
Central bank reserves – reserves held by commercial banks at the Bank of
Commercial bank money – bank deposits created either when commercial
banks lend money, thereby crediting credit borrowers’ deposit accounts,
make payments on behalf of customers using their overdraft facilities, or
when they purchase assets from the private sector and make payments on
their own account (such as salary or bonus payments).
Only the Bank of England or the government can create the first two forms of
money, which is referred to in this book as ‘central bank money’. Since central
bank reserves do not actually circulate in the economy, we can further narrow
down the money supply that is actually circulating as consisting of cash and
commercial bank money.

Physical cash accounts for less than 3 per cent of the total stock of money in
the economy. Commercial bank money – credit and coexistent deposits –
makes up the remaining 97 per cent of the money supply.

£14.99 plus £2.50 postage within the UK, or £4.50 with international shipping

There are several conflicting ways of describing what banks do. The simplest
version is that banks take in money from savers, and lend this money out to
borrowers. This is not at all how the process works. Banks do not need to wait
for a customer to deposit money before they can make a new loan to someone
else. In fact, it is exactly the opposite; the making of a loan creates a new
deposit in the customer’s account.

More sophisticated versions bring in the concept of ‘fractional reserve banking’.
This description recognises that banks can lend out many times more than the
amount of cash and reserves they hold at the Bank of England. This is a more
accurate picture, but is still incomplete and misleading. It implies a strong link
between the amount of money that banks create and the amount that they
hold at the central bank. It is also commonly assumed by this approach that
the central bank has significant control over the amount of reserves banks hold
with it.

We find that the most accurate description is that banks create new money
whenever they extend credit, buy existing assets or make payments on their
own account, which mostly involves expanding their assets, and that their
ability to do this is only very weakly linked to the amount of reserves they hold
at the central bank. At the time of the financial crisis, for example, banks held
just £1.25 in reserves for every £100 issued as credit. Banks operate within an
electronic clearing system that nets out multilateral payments at the end of each
day, requiring them to hold only a tiny proportion of central bank money to
meet their payment requirements.

The power of commercial banks to create new money has many important
implications for economic prosperity and financial stability. We highlight four
that are relevant to the reforms of the banking system under discussion at the
time of writing:

Although useful in other ways, capital adequacy requirements have not and
do not constrain money creation, and therefore do not necessarily serve to restrict the expansion of banks’ balance sheets in aggregate. In other words, they
are mainly ineffective in preventing credit booms and their associated asset price
Credit is rationed by banks, and the primary determinant of how much they lend
is not interest rates, but confidence that the loan will be repaid and confidence in
the liquidity and solvency of other banks and the system as a whole.
Banks decide where to allocate credit in the economy. The incentives that they face
often lead them to favour lending against collateral, or assets, rather than lending
for investment in production. As a result, new money is often more likely to be
channelled into property and financial speculation than to small businesses and
manufacturing, with profound economic consequences for society.
Fiscal policy does not in itself result in an expansion of the money supply. Indeed,
the government has in practice no direct involvement in the money creation
and allocation process. This is little known, but has an important impact on the
effectiveness of fiscal policy and the role of the government in the economy.
The basic analysis of this book is neither radical nor new. In fact, central banks
around the world support the same description of where new money comes from.
And yet many naturally resist the notion that private banks can really create money
by simply making an entry in a ledger. Economist J. K. Galbraith suggested why this
might be:

The process by which banks create money is so simple that the mind is repelled. When
something so important is involved, a deeper mystery seems only decent.

This book aims to firmly establish a common understanding that commercial banks
create new money. There is no deeper mystery, and we must not allow our mind to
be repelled. Only then can we properly address the much more significant question:
Of all the possible alternative ways in which we could create new money and allocate
purchasing power, is this really the best?

£14.99 plus £2.50 postage within the UK, or £4.50 with international shipping

Download the Foreword and Overview for free

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September 1, 2011

It has probably  taken me all this past month of August  just to deal with the huge amount of stress these unpleasant social workers and council people are inflicting on my son and me. That’s why I haven’t posted anything here on this blog since social services tried to fling my son and I out onto the streets at just a few hours notice at the end of July. My mind has been  basically shattered !

Yesterday, August 31st, I went for a walk in the woods nearby and was puzzled why I seemed so incredibly exhausted. I had spent the whole day trapped in the ghastly bed and breakfast accommodation social services had condemned us to stay in. As I had had loads of sleep the previous night I soon realised the exhaustion was entirely generated by the mental fatigue caused by the extreme, excruciating stress I am experiencing most of the time.

I had been trying to make ‘phone calls and use the internet to send emails to sort out what, exactly, was going to happen the next day. I had been told the bed and breakfast place was no longer going to be paid for by social services and I was being threatened once again with being out on the streets with my young son –  roofless and rootless; all thanks to the thieving banks who stole my home from me.

It was a terrible day. I had to find out from social services what they were planning. Although they have a legal duty to house my homeless child, they had already proved they had no respect for the law when they attempted to fling us both out onto the streets a month ago. It now seemed they were planning to try and get away with playing the same dirty trick again. (more…)


July 20, 2011

Yup, I spelt them right this time !

I suddenly twigged, once I had got away from my computer after writing the previous story about the poisonous ASDA DOUGHNUTS that have given me the severe squits for a few days, what actually was the cause of that uncomfortable feeling  I had something was wrong about what I had written.

It was that bloody American spell checker telling me the way to spell DOUGHNUTS was Donuts, or perhaps even Dohnuts – as in Doh, a popular word Americans now seem to communicate a lot of what they have to say to each other with, having taken lessons in how to speak eloquently from ubiquitous dumb cartoon character Homer Simpson.

Sod  off you useless American spell checkers. You are a total pain in the backside !

Anyway, after starting going on about those awful  ASDA DOUGHNUTS which had made me so ill, I was too tired to make another observation about them I had wanted to make because it was the middle of the night; about 3 a.m. or something. So, here is the rest of what  I planned to say about a very unpleasant doughnut experience. A typical hazard of our Modern Times, where Big, Blundering, Bossy Business constantly finds new ways to cut corners and make even more profit by degrading the quality of every product we buy from them ! (more…)


July 17, 2011

Wowsers, I am ill and feeling very sorry for myself. I am also very,very cross about it.

I feel a bit like a hangover, but worse. I have a bruise-like pain in my lower abdomen which hurts a lot when I walk or even just move. And I have a sort of hangover feeling in my head – but worse; and I am as weak as a baby.

Overall it feels vaguely similar to having a temperature. The bottom line is it is extremely difficult to get anything done. Forcing myself to be active doesn’t get me very far because that is what I have done and I am just completely inefficient about doing anything. It’s just not worth trying really. I am really really weak. I stumble around. It’s a bit like being immersed in a great vat of sticky treacle which makes any movement a huge effort.

But, this grotty feeling has a very precise cause, and I know exactly what (more…)


July 14, 2011


I desperately need ‘help’. Despite being relatively intelligent & well educated, of the profession & middle classes, I need ‘help’ from someone or somewhere because I am completely flummoxed by the tidal wave of incomprehensible and malign bureaucracy which is assaulting me from all sides.

“Flummoxed’ is a rather too polite & diplomatic way of describing the problem really. Persecuted and driven to despair by having every attempt to live a normal life thwarted by small minded fools employed by various organisations, mostly government ones, who have invented weirdly convoluted Kafka-esque ‘rules’ to force me to spend my entire time every day battling with, would be more appropriate.

Trying to deal with the demented demands of these Alice in Wonderland ‘rules’ which govern all of my everyday life at the moment, is quite impossible.

I just do not know how to deal with it; what the ‘rules’ are and so on; what ‘forms’ to fill in; what ‘applications’ to make etc. And there is no-one to explain how to go about complying with this time-wasting nonsense.

For some things, I need a lawyer to advise me on how to use legal procedures and law to force malign people to stop behaving illegally or with a blatant disregard of the everyday rule of law, who are wrecking my life and my child’s life.

That is what lawyers are for. They know the law and how to use it; the ordinary citizen does not, which is why they employ the specialist knowledge of the lawyer who will know how to deal with legal problems the ordinary person does not.

But lawyers are (more…)


July 12, 2011

I have just learned the local council is planning to steal the entire contents of my house.

My twelve year old son and I were evicted from our home by the evil, grasping sub-prime mortgage lender Southern Pacific Mortgages Limited or SPML for short.

This bunch of thieves was a subsidiary of the dishonest bank Lehmanns Bros which caused the Worldwide financial disaster which we are still struggling with today, with rapidly increasing job losses and poverty everywhere.

So, the council sent me a letter telling me why they have a legal obligation to re-house my son and I, then announced (more…)


July 8, 2011

Oh, my fellow Wowsers, have I got a tale to tell you !

I don’t think you could make it up really. Truth is stranger than fiction they say, and I wouldn’t dare invent all these events and expect anyone to believe it all – unless it was all true. But it is all true, and I can prove it; so here goes.

I’d like to start at the beginning, but that was a long time ago, so it can wait while I just catch up with the present – somewhere in the middle of the story, so to speak. Anyway, I’m too tired and too busy right now to think all the way back to that beginning some thirteen years or so ago.

In a way, it started even earlier than that I suppose; when I (more…)


January 20, 2011


“WHY did Gordon Brown react so violently when asked in the Commons about Baby P’s shocking death?

Was it a guilty conscience?

The unforgivable death of Baby P has (more…)


December 16, 2010

It is right suddenly unemployed/ill people should receive housing support to prevent the nasty minded lenders throwing them out on the street within a few months – which is what they generally try and do.

But the housing benefit system is utterly, utterly poisonous because it costs the taxpayer a fortune, lines the pockets of the lenders & completely fails most people falling on hard times. I know this because (more…)


November 29, 2010

And reduced me to complete poverty as a single father, forced into bringing up my son without his mother.

Its all done and dusted and I have custody now and have done for ages.

Briefly what happened was: (more…)