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.
After a slow but steady increase since October, the UK rate of inflation fell to 0.3% in April from 0.5% in March, deviating from the expectations that economists had pencilled in. What triggered this decline? And more importantly, what are some of the headwinds in the face of monetary policy?
Positive Money advocates a shift away from the current ‘debt-based’ monetary system, in which almost all money is created by commercial banks when they make loans, to a ‘sovereign money’ system in which only the central bank is able to issue new money. In the past, we’ve described sovereign money as ‘debt-free money’, because it is spent into the economy without any household or firm taking on further debt.
Lord Mervyn King, who was Governor of the Bank of England from 2003-2013 and saw the financial crisis play out from the centre of the action, has just released his new book, The End of Alchemy. Our short review of the book is available here. This article explains his proposal for the Bank of England to become a "Pawnbroker for All Seasons".