SOVEREIGN MONEY – Paving the way for a sustainable recovery (Report)

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By fuelling our economy through ever-rising levels of household debt, we are repeating the mistakes that led to the 2007-08 financial crisis. Ever since that crisis, the government and Bank of England have tried to encourage further borrowing and further lending by banks. But this is treating the cause of the financial crisis – excessive creation of money and debt by banks – as though it can also be the solution. This strategy may lay the foundation for the next financial crisis.

Sovereign Money (Final Web)-1So there’s an urgent need for an alternative strategy for fuelling the economic recovery. Our report, Sovereign Money: Paving the way for a sustainable recovery,  provides that alternative, known as Sovereign Money Creation (SMC), and offers a way to make the recovery sustainable.

In a similar way to Quantitative Easing, Sovereign Money Creation relies on the state creating money and putting this money into the economy. But whereas QE relied on flooding financial markets and hoping that some of this money would ‘trickle down’ to the real economy, Sovereign Money Creation works by injecting new money and spending power directly into the real economy. Depending on how it is implemented, the policy could be many times more effective at boosting GDP than Quantitative Easing.

But even more importantly, whereas the government’s current growth strategies all rely on an over-indebted household sector going even further into debt, Sovereign Money Creation does not require that either the government or households increase their debts. In contrast, SMC can actually reduce the overall levels of household debt. It also makes banks more liquid and makes the economy fundamentally safer.

And by setting a precedent for sustainable creation of money for the real economy, in the public interest, the policy would show that there are other ways of fuelling the economy than simply relying on banks to create money for property bubbles and financial markets.

We believe that ultimately, it is a matter of when, not if, this policy will need to be implemented.

Buy a hard copy for £6 plus shipping (60 pages – only 100 copies available) or Download PDF

Thank you!

Thank you to everyone who contributed in our June and September funding appeals. This work has been entirely funded by your individual monthly donations, as we didn’t receive any outside grant funding for this research. So we couldn’t have done it without you all.

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Buy a hard copy for £6 plus shipping (60 pages – only 100 copies available) or Download PDF

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Andrew Jackson

Andrew Jackson holds a BSc in Economics and a MSc in Development Economics from the University of Sussex, and is currently studying for a PhD at the University of Surrey. He is a co-author of the book “Where Does Money Come From? A guide to the UK monetary and banking system” with Josh Ryan-Collins and Tony Greenham from the New Economics Foundation, and Professor Richard Werner from the University of Southampton.
  • Williewortel

    SMC: It’s absolutely a brilliant idea and very easy to implement too. Just explain to people why it won’t hurt their savings.

  • John Morrison

    I have only scanned through it so far – then that is what many will do.

    I think it is spot on exactly what is needed.

    Banks can play their games but nations being prevented from providing enough of their own sovereign currency to mobilise their own economies is just not on.

  • failedevolution

    “…the bankers in particular, do not want to risk the appearance of a
    “mad” politician of the Andrew Jackson type, who could
    nationalize central bank and zero national debt because that would
    mean the end of their absolute sovereignty.”

    • John Morrison

      I think they were talking about President Andrew Jackson. It is an interesting coincidence, a namesake with the same ideological drive and attention to how things really work.

      • failedevolution

        I’m talking about the President too.

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