In a significant breakthrough, the Bank of England (BoE) has just announced it will be adopting a policy change that Positive Money has been arguing for over the last 2 years. The BoE will finally allow non-bank ‘payment service providers’ (PSPs) to hold accounts at the BoE, so that they can compete with existing banks to provide current (checking) accounts. This will break the stranglehold that large UK banks have over the provision of payment accounts - and represents a step towards further changes that would limit the ability of banks to create money.
The Federal Reserve 'might legitimately consider’ using Public Money Creation in ‘extreme circumstances’, when there is ‘very weak growth’ or ‘deflation’, Fed Chairwoman Janet Yellen said earlier this week at a press conference.
Throughout history, governments have used their ability to create money to fund public spending. While none of these policies were called, “People’s QE”, "Strategic QE", “Sovereign “Money Creation”, or “Helicopter Money” (what Positive Money collectively refers to as Public Money Creation), they shared the common trait of using newly created state money to finance government spending, rather than relying on commercial banks to create new money through lending.
At school or university, we’re told that money is created by the central bank. But that is not actually the case: the commercial banks are the ones creating money. The same banks that love to take risks and helped cause a global financial crisis a few years ago. Could fintech companies save us from the instability they create?, reads an article written by Ben Dyson, founder of Positive Money, in the issue #04 of Tea after twelve magazine.