UK parliament to debate money creation for first time in 170 years

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UK Parliament will hold a three hour debate on the issue of ‘Money Creation and Society’ on Thursday 20th November. This will be the first time in 170 years that Parliament has debated money creation.

Approximate expected start of the “Money Creation & Society” debate is around 12:30PM. 

The Money Creation and Society debate is being hosted by Steve Baker (Conservative), Caroline Lucas (Green), Michael Meacher (Labour), Douglas Carswell (UKIP), and David Davis (Conservative).

The backbench debate in the Main Chamber of Parliament creates an opportunity for MPs from all parties to learn about the issue, ask questions and deepen their understanding. As the results of our recent poll show, most MPs lack a sufficient understanding of money creation, leaving them ill-equipped to legislate on important policy.

We have produced a full briefing for the money creation debate that you can see here.

There are lots of important questions that Parliament should address during the three hours in the Main Chamber, these include:

Who should create money? Should high-street banks have the effective right to create money every time they make a loan, given the recent consequences for the economy? How should newly created money be used? Do we want banks to have the power to create money when this leads to unaffordable housing and financial instability? Should we have allowed the Bank of England to create £375bn with little scrutiny from parliament, and use this money to inflate financial markets? Were there better uses of this money?

We only have less than two weeks to ensure that Members of Parliament attend the debate – and also understand the basic facts about money!

We need your help:

1) Invite your MP to the historic debate on money creation

You can help make politicians aware of the issue of money creation by banks and all its negative impacts on society. You can do this in just 2 minutes using the link below:

Email your MP. You can use our email template to ask them for their commitment to be there.

Phone your MP. This is the quickest way to let them know the debate has been announced and find out if they are planning to go.

You can simply phone the House of Commons switchboard on 020 7219 3000 and ask for your MP by name. You will be able to leave them a message or speak to a member of their staff.

Remember to be polite, your message is much more likely to make it to your MP if you stick to the point and put your case across clearly.

Tweet your MP. Include the hashtag #sovereignmoney in your message so we can follow your conversation.

You can find your MP’s twitter handle here

Remember to include their handle in your tweet. Here is an example tweet:

Historic backbench debate ‘Money Creation and Society’ > http://ow.ly/DRxpd > @yourmpshandle will you be there? #sovereignmoney

 

2) Tell your friends, family and colleagues

We only have two weeks to go and we need as much support as possible. Share our campaign with your contacts. Forward this email, or share this

BBD fb

3) Watch the debate LIVE on Live Parliament TV. On Thursday 20th November you can watch the debate live online here

 Approximate expected start of the “Money Creation & Society” debate is around 12:30PM. 

 

Thank you to the 2,700 of you who emailed your MP and got them interested in money creation! It’s thanks to your efforts that we have sufficient number of MPs interested in this debate.

 

Backbench Briefing Money Creation Debate

 

 

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  • http://www.dailykos.com/user/Auburn%20Parks/ Auburn Parks

    Make sure to let them know that Parliament is part of the money creation process when they deficit spend, and that Parliament has the unlimited ability to do so. In other words, The People currently have this right of money creation too, not just banks and we should use it more effectively.

    • Bob Welham

      In general UK government borrowing does not create new money.
      Please see page 304 of Modernising Money.

      • http://www.dailykos.com/user/Auburn%20Parks/ Auburn Parks

        Sorry Bob, but thats just objectively wrong. And here’s why:

        The Tsy is the Govt securities monopolist
        The Central Bank is the reserve (currency) monopolist
        The only way to “buy” Govt securities is with Govt currency

        These are facts, they are not my opinions. And your understanding and framework of the monetary system must incorporate these facts. So where does the currency that the Govt “borrows” come from? Well, it necessarily comes from the Govt.

        Furthermore, Govt securities are digital pound accounts at the BofE, reserves (excluding the negligible amount of physical cash) are digital pound accounts at the BofE. Both account types are liabilities of the Govt (just different Govt agencies). Why anyone would count one type of account as “money” and not the other is confusing.

        • Bob Welham

          Using the scenario from page 304 of MM, we suppose that a
          pension fund P, which has its bank account at Megabank, buys £1M of new gilt edged stock. Then:

          (1) P’s bank balance (Megabank’s liability) decreases by £1M
          of commercial bank money.

          (2) £1M of central bank money (Megabank’s asset) is transferred from Megabank’s BoE reserve account to HMG’s BoE account.

          (3) HMG transfers £1M of central bank money from its BoE
          account to the BoE reserve account of Regalbank (a new asset for Regalbank) where the NHS has a regular bank account from which it can spend into the general economy.

          (4) Regalbank credits the NHS account with £1M of spendable
          commercial bank money (a new liability for Regalbank).

          We deduce from (1) to (4) above that:

          Megabank’s balance sheet shrinks by £1M and Regalbank’s
          balance sheet expands by £1M. The integrity of each is maintained.

          The aggregate amounts of central banks money and commercial
          bank money in the system both remain unchanged.

          No new money, of either sort, is created.

          • http://www.dailykos.com/user/Auburn%20Parks/ Auburn Parks

            Sorry Bob, even though you have the accounting right you are getting the implication wrong:

            Where did the MegaBank get the reserves? They got them from the only place they can come from, the central bank.

            The Central bank provides the currency with which to “buy” the gilts.

            This is why QE doesnt add anything to the economy and its not “printing” money in any meaningful sense. The Tsy only spends and taxes in Govt currency. So when the Tsy spends 1M and taxes 900K, there is 100K in Govt currency left in the banking system. This currency can only be used to either “buy” gilts or pay taxes, there is no third options in the aggregate (again, cash withdrawals are not really relevant to this process).

          • Bob Welham

            Page 304 of MM demonstrates convincingly that each individual event of UK government borrowing changes neither the amount of central bank money in the system, nor the amount of commercial bank money.

            Extrapolating, the series of such borrowing events which constitutes government deficit spending also changes neither amount of money.
            It follows that UK government deficit spending of itself does not create money. I doubt that this can be made any clearer and I leave the matter at that.

            In contrast, since almost all QE gilt purchases were made from non-banks, the QE program did increase both the amount of central bank money and commercial bank money, each by £375bn.

            Please see pages 90-100 of the following BoE publication, in particular figure 1, to confirm this:

            http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/qb0902.pdf

          • http://www.dailykos.com/user/Auburn%20Parks/ Auburn Parks

            Even though I’ve addressed all the points you’ve written, you’ve not engaged with my examples at all. The reason for this is that once you do so, you must acknowledge that you are wrong.

            Again, I agree with you (the accounting is undeniable), issuing Govt securities does not add any money, as it exchanges one type of pound bank account type for another (reserves for gilts). its the deficit spending that adds the money. Which is what I’ve said all along.

            We already did the accounting on Gilt issuance, now lets complete the cycle and do the spending shall we?

            Govt spends 1K on retirement for person A (who banks at private bank B)

            Person A’s checking account at bank B +1K

            Bank B’s liabilities (person A’s account) +1K
            Bank B’s assets (reserve account at BofE) +1K

            Tsy reserve account (asset) -1K
            BofE liabilities (Tsy account) -1K

            So the bank’s net position is unchanged

            The Govt’s net position is unchanged
            Person A has +1K

            The accounting couldn’t be clearer.

            Taxation reverses this process, and to the extent that there is spending above taxes (deficits), the non-Govt gets this income.

          • Bob Welham

            Both taxation and government borrowing of themselves decrease
            the aggregate amount of commercial bank money in the immediate term. Government spending of itself increases the aggregate amount of commercial bank money in the immediate term, whether that spending is funded by taxation or by borrowing, that is whether or not it is deficit spending.

            These fluctuations of aggregate commercial bank money due to
            government taxation/borrowing/spending are consequences of the government itself having an account at the BoE and thus holding its money there as central bank money. They exist because of the two-tier structure of the UK money system. Over time, allowing for a little fiscal lag, they balance out. Until it spends into the general economy, the government has no need to manifest its money as commercial bank money.

            So the UK government tax/borrow/spend cycle has no net effect
            on either aggregate central bank money or on aggregate commercial bank money. No enduring new money of either sort is created.

            Government IOUs (gilts) are created by government borrowing
            and, under certain circumstances, these are used as near-money, but that is a separate matter.

          • http://www.dailykos.com/user/Auburn%20Parks/ Auburn Parks

            bob- commercial bank deposits are just one type of money, certainly not the only type.

            The nice thing about accounting is that, like physics and math, there is no ambiguity. Accounting is not an opinion, its not politics. I’ve laid out the accounting for you, and the result is clear.

            Deficit spending adds Govt IOUs (money) to the non-Govt.
            Issuing Govt securities merely changes the type of Govt IOU, not the number.

            If you’d like to argue against these facts, please use the accounting.
            But you wont, because you cant. The only thing that needs to change is your cognitive bias. You have personally never thought of Govt spending as creating money, you obviously think of Govt finances in terms of your personal finances, so when presented with evidence counter to that, you are experiencing cognitive dissonance. Thats totally normal, but it doesnt change the fact that you are wrong

          • Bob Welham

            We seem to disagree over semantics. If gilts count as ‘money’ then of course deficit spending creates new money. If we stick to the three types of money outlined on page 3 of Where Does Money Come From, and regard gilts only as near-money, then it does not.
            I would argue that the latter interpretation is the more conventional and certainly it is the one usually adopted in discussions on the PM website.

            As far as I am aware, there is no cognitive dissonance on my part, and ad hominem attacks do not engage me. I simply recognize that we use the word ‘money’ differently.

          • http://www.dailykos.com/user/Auburn%20Parks/ Auburn Parks

            I was certainly not attacking you Bob. Cognitive dissonance is something everyone is a victim of throughout their lives, its just human nature.

            On the “are gilts money” front. If you dont think term deposit public bank accounts are NOT money thats fine, but then you must also exclude term deposit private bank accounts from the money supply count. You are free to do this, although it makes no sense.

          • http://www.dailykos.com/user/Auburn%20Parks/ Auburn Parks

            What is the difference between a 12-month CD at the royal bank of scotland and a 12-month gilt at the bank of england?

          • http://www.dailykos.com/user/Auburn%20Parks/ Auburn Parks

            As far as the accounting for QE:

            Person A sells 1K gilt to B of E and uses private bank B:

            Person A assets (private bank B checking account) +1K
            Person A assets (gilt account at BofE) -1K

            Bank B’s assets (reserves) +1K
            Bank B’s liabilities (Person A’s account) +1K

            Govt (Tsy) liability (gilts) -1K
            Govt (BofE) liability (reserves) +1K

            As you can see, nothing gets added.

          • http://www.dailykos.com/user/Auburn%20Parks/ Auburn Parks

            deficit spending adds pound deposits to the banking system, these pound deposits can either be in the form of reserves or gilts. Either way the Govt’s liabilities (Non-Govt assets) increase.

            If you want to count pound deposits in reserve accounts as money and not pound deposits in gilt accounts, then you would have to apply the same logic to checking and savings accounts at private banks.

            When you personally shift your bank deposits at RBS from on-demand checking accounts to a term deposit account (CD), do you consider that money as gone? Of course not, so why would consider the same operation at the public bank any differently?

  • Chez

    Does your MP fail to respond to emails like mine? If so, I suggest you also meet them in person at one of their regular surgeries/advice sessions… much more effective. You’ll be surprised how easy it is and you’ll get a reply then and there. Obviously a little preparation goes a long way in making a lasting impression. Check out the full step-by-step guide courtesy of Positive Money here: http://bsd.wpengine.com/get-involved/educate-your-mp/#Person

    • NICEGUY7777

      Good idea Chez, and if you can, gather some fellow constituents to accompany you, especially representatives of local community groups – this will be more impressive to the MP, and may make them more attentive.

  • Guy Burger

    Heres a little extra bit I added on my latest email about the debate to my MP Roger Gale. Dear Roger,

    This letter is wholly from me and not a template other than the details of what to attend.

    Money creation, and how its in the hands of private banks, and created by debt goes right to the heart of how our system is failing hard working people.

    It creates inflation and a never ending scramble for the worlds resources to pay off an infinately growing amount of debt. Not only that but it lets greedy private banks who care about nothing other than getting wealthy and powerful set many of the agendas in society.

    Wages have to remain static, partly because ever larger amounts of money are being syphoned off by the super rich in the financial sector most of whom are based in London.

    The last financial crisis and the ridiculous bail-outs given to private banks should have alerted MP’s to the worrying fact that banks are actually controlling a government thats too afraid to let the fail. They are a business like any other so why should they get special treatment?

    I ask you as my representative in Parliament to go to this debate, attend, and then push for change in policies and evolution of how money is created so as to take power away from the financial institutions. Otherwise yours and every other MP’s balls will be forever in their hands and our world will continue to get raped by a greedy and impersonal system.

    I am grateful for your attendance to this and your reply to this email letting me know if you intend to attend this debate.

    (Details of debate time ect followed in the original.)

    • http://www.dailykos.com/user/Auburn%20Parks/ Auburn Parks

      Money creation is not only in the hands of commercial banks. The Govt creates its own money as well. It can do this through either Bank of England lending of reserves, or by deficit spending.

      • Guy Burger

        That is true Auburn but it does not even compare in volume or effect to what is created by private banks through debt so its an irrelevance here. I stand by my original statement as the real power remains in the hands of the private banks.

        • http://www.dailykos.com/user/Auburn%20Parks/ Auburn Parks

          Dont get me wrong brother. I’m not advocating for the ratio of the two to remain the same. If I had my pick, I’d like to see strong controls on bank lending and large increases in Govt money creation to compensate, to the point where instead of it being 80-20% private – Govt, lets bring it down at a minimum to 50-50.

          • RJ

            Agree with this. But we need to get over the fear of Govt debt first.

            If debt (T bonds) was called say pension savings (which is where a lot ends up I guess). Or some other name other than Govt debt. As unfortunately most people equate Govt debt to private debt. When its completely and utterly different. Govt debt = non Govt savings. And Govt’s like the UK can create debt without limit by journal entries.

          • http://www.dailykos.com/user/Auburn%20Parks/ Auburn Parks

            National equity shares or something like that. You’re right, just by using the word debt, people get confused.

            Like I always ask people:

            Whats the difference between a 12-month CD at Chase and a 12-month T-note at the Fed? Besides for the fact the T-note is safer, nothing!

            But you never hear anybody worry that Chase has $2T in debt (customer bank deposits). Yet when people have bank deposits at the central bank, all of sudden everyone screams bloody murder, its tragic.

          • ukguyforum

            Mathematical Perfect Economy [ MPE ] is the only solution forward but governments are scared of this and upsetting the corrupt bankers
            google this to educate yourself on money creation.

          • http://www.dailykos.com/user/Auburn%20Parks/ Auburn Parks

            So I scanned through some of the stuff at the perfect economy website, holy crap is that some vacuous bullshit. If thats your idea of “educate yourself on money creation” then you’re just as far off the reservation as any right wing gold bugger I’ve ever seen. Good luck with all that.

        • RJ

          Whats the current US deficit. 17.9 trillion. Its hardly irrelevant.
          And the UK deficit. 1.3 trillion.
          Govt currently have huge power to create money as required when required if they so desire. And if they want they can issue reserves to cover this spending (as they do), then issue bonds (as they do), and then buy back the bonds using QE (as has been done). Which effectively means the Govt has paid for their spending using BoE reserves (the Govt’s and banks money). I’m not saying they should do QE. But it is an option to.
          -Issue reserve to cover spending. Or
          -Issue bonds to cover spending.
          Both are done by JE and both can be done without limit by a monetary sovereign Govt like the UK. The only danger is if it was done excessively is inflation or currency depreciation (not running out of money etc). But we are not even close to this point yet. More deficit spending would massively improve the UK economy.

          • Guy Burger

            The UK and US govts do what they are told to do by the banks though. A fact that was made amply clear by the crazy bail-outs.

          • RJ

            Crazy bail outs? Would you have sooner they let the banks crash. With the massive disruption and suffering it would have caused.

            As it was the Govt took over the banks and will likely sell them for a profit. All it cost was the time taken to do a few journal entries (create BoE reserves). And the Govt got to own a bank (it did not cost the taxpayer a penny).

          • Guy Burger

            Why couldn’t we let them just go to the wall like any other business and then just have paid the shortfall to citizens who lost money with them? Such heartless institutions should not be the most powerful thing in society. A society based on greed is a shallow and painful thing, no good comes from such emotions.

          • RJ

            Yet your solution is a heartless one.Many good people work in banks (the majority do not earn millions not even close). And the disruption and hardship it would cause if you let them collapse to people who desperately need the money held in deposit accounts.

            Best for the Govt to step in a take over the bank. Although they do not need to treat the top management quite as well as they do.

          • Guy Burger

            It would change the behaviour of the banks though, meaning more sustainable banking in the future for all those sacked, something which could never be achieved all the while they totally protected from catastrophe.

            Fairness is another thing at stake here, why should banks get these bail outs and not other industries. If we are to have a meaningful society then it must be fair and compassionate, money should go to where theres a need and where it does good first.

            The banks you speak of did much harm to the world so if they have destroyed themselves through their greed that may be for the greater good.

            They are the ones banging on about liberalism in the economy, but the way they have been treated is like socialism for the least needy while ordinary people find themselves driven to food banks. Its crazy hypocracy.

          • RJ

            The behaviour of banks has been changed. And the composition of top management of many banks
            Bailouts? The Govt took over the banks. Shareholders saw the value of their shares fall
            Harm to the world? Stop blaming banks. We took out the loans. And the Govt could have stopped this lending at any point. By for one increasing interest rates. So its us or the Govt responsible for the lending or where the money was spent.
            You could try reading articles or books that show just how much power the UK Govt has right now. They are really the top dog in the UK not the banks. But pretend they aren’t and introduce things like austerity. Whereas the UK Govt can spend what they like. Yes care is needed with inflation and currency depreciation. But the UK is a long way from this point

  • Robert Searle

    I hope the debate will go well. Good Luck!

  • http://www.ukcolumn.org Justin Walker

    Unless you tackle head on and close down the Bank for International Settlements and their ability to control 96 per cent of the world’s money supply with their network of sixty central banks, including of course the Bank of England which you see as part of your ‘sovereign’ solution, you are doing the proverbial in the wind! Much easier to restore the debt-free, interest-free Treasury-issued Bradbury Pound to provide the liquidity needed for a prosperous and happy economy free from the globalist banksters.

  • john

    Invite them to go here this should explian it rather well
    http://www.hiddensecretsofmoney.com

  • john

    Ask them to go here this should explain it rather well http://www.hiddensecretsofmoney.com
    And dont remove this post as it is valid O.K

  • roberto martorana

    This is my page about a new theory macroeconomic conception monetary system https://www.facebook.com/notes/528952320466883/ , #macroeconomicsustainable ,and any reply are well accepted : i wrote about this on “riodialogues”(exposed better in the note https://www.facebook.com/notes/teoria-della-compensazione-della-massa-monetaria/bozza-espositiva-/228248770537241 :I suppose a new rule for Central Bank: when one of the central bank have a new emission of money whith each rate the same bank print corrispective quantity of money of the rate ,out of budget,and give for free this quantity ,to compense the monetary mass ,at a pubblic commission that use for pubblic necessity etc etc…we resolve three problem :pubblic necessity,pubblic budget,and market crisis,;for example : the C. B. have a emission of hundred billion unit and fix a rate of 3% and give this money to commercial bank,at the same moment print 3 billion and give these to pubblic commission(ONU?) that spend for pubblic problem #quantitativefree……at the end the commercial bank retourns 103 billions and the C.B .budget is ok ..whithout problem of failure of monetary mass….) http://www.facebook.com/pages/Teoria-della-compensazione-della-massa-monetaria/137335536277534

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