MPs debated Money Creation and Society

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After 170 years of silence from the House of Commons on the subject of money creation, there was finally a debate in the Main Chamber at the House of Commons on the subject of ‘Money Creation and Society’ on 20th Nov 2014.

During the debate we heard 8 speeches from: Steve Baker MP, Michael Meacher MP, Peter Lilley MP, Austin Mitchell MP, Zac Goldsmith MP, Mark Durkan MP, and then from the shadow front bench, Catherine McKinnell MP, and the government Andrea Leadsom MP.

There were also questions from a further 12 MPs. Additionally, more than 15 MPs came to the debate and listened, but did not speak. Many MPs did respond saying they would have liked to have been there but due to prior commitments or having to be in their constituency they couldn’t be.

We were really pleased with the level of debate, the points raised, and the collaborative atmosphere. Whilst it took a lot of effort to make MPs aware of the debate and willing to attend, it was definitely a worthwhile awareness raising exercise.

It was always going to be difficult to get MPs to attend. We know that many MPs don’t understand how the money system works and so clearly would be not too comfortable discussing these issues in front of a TV camera! The MPs that spoke were self-selected so the level of debate was high. MPs only spoke if they felt confident enough to talk about the topic, therefore, only MPs with some knowledge spoke. It is clear many MPs in the Chamber were simply there to learn. However, even those who spoke were willing to admit that they have limited knowledge, and that this is a problem:

As Zac Goldsmith MP highlighted: ‘this issue is not well understood by members of the public….it is also not well understood by Members of Parliament. I would include myself in that. I suspect that most people here would be humble enough to recognise that the banking wizardry we are discussing is such a complex issue that very few people properly understand it.’

He went on to discuss how that is a problem: ‘how on earth can we be confident that the reforms that we have brought in over the past few years are going to work in preventing repeated collapses of the sort that we saw before the last election? In my view, we cannot be confident of that.’

The debate did lead to some really fundamental questions being asked about the problems with the economic system we have.

Steve Baker MP stated: ‘We are in a debt crisis of historic proportions because for far too long profit-maximising banks have been lending money into existence as debt with too few effective restraints on their conduct and all the risks of doing so forced on the taxpayer by the power of the state.’

‘Money is not neutral. It redistributes real income from later to earlier owners—that is, from the poor to the rich, on the whole. That distribution effect is key to understanding the effect of new money on society. It is the primary cause of almost all conflicts revolving around the production of money and around the relations between creditors and debtors.’

Austin Mitchell MP stated that ‘This House and the Government are obsessed with money and the economy, but we never debate the creation of money or credit, and we should, because, when it comes to our present economic situation and the way the banks and the economy are run, that is the elephant in the room. It is time to think not outside the box, but outside the banks; it is time to think about the creation of credit and money.’

There were no front benchers engaged in the debate, apart from the 2 representatives that had to give responses. To engage publicly in this debate would be to engage with the underlying problems of our economic system, and current fiscal and monetary policy. That is not a step any of the mainstream parties are willing to take yet.

Micheal Meacher MP laid out his full support of the creation of a ‘sovereign money system’ explaining how putting the power to create money back in the public interest would address 5 points: ending too big to fail, increasing economic stability, lending to productive investment, damping house price bubbles and reducing wealth inequality, and finally redressing the democratic deficit of the current banking system. He finished his speech by calling on the Government to set up a commission on money and credit, with particular reference to the potential benefits of sovereign money.

Establishing a commission to look into money and credit was supported by Zac Goldsmith. Andrea Leadsom, the Economic Secretary to the Treasury, suggested that the Treasury Select Committee (TSC) could look into this. The Positive Money team will be pushing for this with TSC members to ask them about their support for a commission. The news that Andy Haldane, the chief economist at the Bank of England, will be commissioning heterodox economics research was praised during the debate.

What we would like you to do next

Money creation is likely to be forgotten about in Parliament unless we keep it on the agenda. We need to keep raising the debate and highlighting how the current system causes high house prices, rising inequality and financial instability. Next year the general election will take place, this provides an opportunity to ensure our MPs are listening and representing the concerns of their constituents.

Is there a Positive Money local group in your area?
Could you organise a meeting or an event with your MP and potential candidates on this topic?

The Positive Money local group in Hackney recently organised an event on Housing and Money Creation. It was attended by over 100 local residents along with their local MP Diane Abbott and councillor Philip Glanville, Hackney Cabinet Member for Housing. You can read more about the event here.

Positive Money meetups and events are being held across the country. There are lots of opportunities to get more involved, talk about these issues and start taking action. If you are interested in organising an event in your local area, joining a local group or starting a new one, please email Dora@positivemoney.org

Watch the highlights from the debate (1 hour):

(If you can’t spend 1 hour, make sure you watch at least this 12 minute video.)

 

 

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  • NathanRJessup2001

    Watching the video, I am struck by the Shadow Treasury Secretary stating (49:45) that currency is created by people depositing money into their accounts. Has she not been listening to the debate, or am I missing something? I thought the entire problem is that money is created when people borrow – not when they make deposits.

    • montmorency

      Yes, even the actual Treasury Secretary got that one right, even if she was wrong in her prescription.

  • NathanRJessup2001

    Michael Meacher drew attention to the fact that only a tiny proportion of bank lending (money issuance) after 2007 was directed towards business investment. Most was applied to speculative purchases in real property (commercial and residential) and asset acquisition (shares, gold etc) none of which encourage growth and economic stability. In fact they are detrimental to the economy. Perhaps a solution would be to return to the days when banks were not allowed to lend on residential property, precisely because of the imbalances it creates in an essential and finite commodity: land. If there were restrictions on the type of lending a bank can engage in, then the principle of who authorises the issuance of money and how much is created becomes less influential on the wider economy. It also means that banks, if insolvent, would not be in a position to call-in loans on people’s residences with the chaos and social costs being born ultimately by taxpayers.

  • JosephMeyer

    Joseph Meyer
    Yes, money is not created by depositing money into a bank account, but this bank can now use this bank account in order to create new money by giving out credits according to the “fractional reserve system”, 1 pound enabling to give 9 pounds (in reality much more!) as new credit “out of nothing” – and of course the bank takes interest + compound interest for this “fiat-money”.
    Hence the trillions of pounds owned by the Rothschilds, Rockefellers, Morgans, Goldman-Sachs, etc. and the growing poverty of the huge mass of the populations worldwide…

    • montmorency

      And contrary to what the the Secretary of the Treasury said , there seem to be very few actual controls on the amount banks lend, since they can always call on additional reserves from the BoE.

  • torc

    Poor attendance for the first debate in 170 years on a subject of such fundamental importance as this. One wonders what exactly would get their attention if recent events haven’t. Just shows much the efforts of Positive Money are needed.

  • Lukedishwasher

    What a fantastic and encouraging debate. It was the first time I’ve seen cross party support like this by three key speakers who obviously grasp the gravity of this subject. A joy to see. Is it not democracy itself that is under threat here (see Michael Meacher 30 minutes in)? It is only Andrea Leadsom, who provides a summary at the end, that uses her metaphoric bath tap to pour cold water on the debate. Her logic was poor and self defeating; in citing the old mantra of a free market economy with minimal government intervention as king, she missed the point entirely of so many earlier remarks. I was almost under the impression she was speaking with an ulterior motive in mind (surely not). In doing so, she lowered the level of debate by returning the discussion to dated ideology that we’ve heard so so many times from that very seat. She must not be allowed to dampen the momentum that was achieved in this debate.
    A big big debt of gratitude to positive money.

    • Simon

      Leadsom is an ex investment banker who is mainly concerned with keeping the status quo, looking after her wealthy friends in the City, rather than the general public.

      • ConradJones

        Hopefully, Andrea Leadsom will understand that their is an alternaitve to the current system, which she must realise has changed since 1971. She will realise that the dregulation of Banks lending – the reduction in restrictions to Banks creating credit – can be seen to have a destabilising effect on the quantity of M4 – using Bank of England data.

        She will hopefully see that this has the consequence of heavy Sate Intervention in the Banking Sector inorder to prevent it from collapsing. She will also realise that as QE was required, she not want us to continue on the path of Japan which has requred State Intervention in their Banking System for the last two decades. With a Sovereign Money system, Banks would be able to have more autonomy over their activities – i.e. They could pay themselves whatever they wanted as the money for these salary negotiations would have to come from the Banks profits and not through Government Subsidies.

        From Andrea Leadsom’s own statements in the debate, she should be in favour of a system which requires less Government: Subsidies, Bailouts,

        Depositor Insurance and reliance on the Lender of Last resort so that the Banking System can operate freely with the only proviso that the infrastructure of the Banking System – where the money is created – is handled by the Public and they are then free to set whatever interest rates thye like to attract depositor money and set their own lending rates. Andrea Leadsom would no doubt be in favour of a Competitive Banking System which also allows for new Regional and National Banks to enter the market.

        This would improve competitiveness and with a Publicly Created money system, would eliminate Bank Runs.

        At present I would not have thought that Andrea Leasdsom is in favour of continued intervention by the State in the form of owning RBS and Northen Rock and the losses to the Public that this has casued as the Toxic Investments from these Banks – such as with Northern Rock – was shifted onto the Public at public loss.
        Surely, a Government Minister such as Andrea Leadsom would not wish to argue for a system that continues to act against the public interests – especially as she is paid by public money to achieve the opposite? Her comments regarding “a small group of middle aged white men controlling the economy” could easily relate to the situation today – except that this small group of middle aged white men are CEOs of major banks, acting on Bahalf of their Bank’s interests with the full support of State Intervention if things go wrong for them.

        Andrea Leadsom may have some very good reasons for wishing to retain the current system but – frankly – the Faulty Tap and Sink analogy needs to be re-thought inorder for her to persuade more people of her arguments.

  • Lewis

    Good debate, but sad to see such a poor turnout. Does no one realise the importance of this issue? It is the heart of most of the problems we are facing today worldwide. I guess it just shows how well the bankers plan is working…170 years and not a single debate. They must be chortling their silk socks off!

  • montmorency

    Some really good speeches. The least impressive were the 2 front benchers, especially the last one – essentially pushing for the status quo, with a bit of tinkering around the edges. Yes, we need “state” intervention, because the unregulated market has proved itself a disaster for the real economy.

  • Greenbacker84

    Seeing as not one person here has stated the obvious (i.e. banks are stealing our promissory obligations, falsifying debt and charging compound interest) how can positive money seriously claim this is progress?

  • jamesmurraylaw

    To get the transcript of teh debate go to:
    http://www.publications.parliament.uk/pa/cm201415/cmhansrd/cm141120/debtext/141120-0001.htm

    Scroll down to the debate beginning at 11.18 am

    There were 19 speakers to the debate.
    6 Conservative MPs
    9 Labour MPs
    The rest were 1 SNP, 1 UKIP, 1 SDLP
    No LibDems
    The Economic Secretary to the Treasury and the Shadow Treasury Minister

    Steve Baker (Wycombe) (Con) – the mover
    “That this House has considered money creation and society ”

    Thomas Docherty (Dunfermline and West Fife) (Lab)
    Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)
    Sir William Cash (Stone) (Con):
    Ann McKechin (Glasgow North) (Lab)
    Mr Ronnie Campbell (Blyth Valley) (Lab)
    Mr Jim Cunningham (Coventry South) (Lab)
    Douglas Carswell (Clacton) (UKIP)
    Mr Michael Meacher (Oldham West and Royton) (Lab)
    Ms Diane Abbott (Hackney North and Stoke Newington) (Lab)
    Derek Twigg (Halton) (Lab)
    Ian Murray (Edinburgh South) (Lab)
    Mr Peter Lilley (Hitchin and Harpenden) (Con)
    Bob Stewart (Beckenham) (Con)
    Austin Mitchell (Great Grimsby) (Lab)
    Zac Goldsmith (Richmond Park) (Con)
    Guy Opperman (Hexham) (Con)
    Mark Durkan (Foyle) (SDLP)
    Catherine McKinnell (Newcastle upon Tyne North) (Lab)
    Andrea Leadsom (The Economic Secretary to the Treasury) (Con)

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