How Much Money Have Banks Created?

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Banks have two key powers in today’s economy – they get to decide:

  1. how much money to create, and
  2. how this money can be spent.

1. How much money have banks created?

From the time when the Bank of England was formed in 1694, it took over 300 years for banks to create the first trillion pounds. It took only 8 years for banks to create the second trillion. Today cash accounts for just 3% of the total money in the economy (coloured green on the chart below). Money created by banks accounts for the other 97% (red on the chart below).



2. How have they used this new money?

Over the last 15 years the banks have used their power to create money to pump hundreds of billions of pounds into the property market (shown in red below). This has pushed the price of housing out of reach of ordinary people. Lending to the finance sector has also increased greatly over the past 15 years; this sector includes the companies that were involved in much of the speculation which contributed to the crisis.

Meanwhile, lending to businesses has stagnated, harming the real (non-financial economy) economy and lowering employment and growth.

Sectoral lending

(Click to view larger)

NEXT: See how we got into this mess because a law passed in 1844 was never updated  >>>

Learn More


Bank of England - Money Creation in the Modern Economy

The Proof

The way that money is taught in universities is often very inaccurate. These papers and sources from central bankers and other experts show how the system really works.


How We Got Here

The laws that make it illegal for you to print your own £5 or £10 notes have been in place since 1844. But these laws have never been updated to account for the fact that 97% of money is now digital.

The Technical Details

Banking 101

Video Course: Banking 101

This free animated video course (total 57 minutes) explains how the modern banking system creates money, and what limits how much money banks can create.

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Advanced: All the technical details

This section covers all the nitty-gritty details of money creation by banks. We cover the three types of money, how balance sheets work, how central and commercial banks create – and destroy – money and what is wrong about the textbooks taught in universities. Read more…



Book: Where Does Money Come From?

“Refreshing and clear. The way monetary economics and banking is taught in many – maybe most – universities is very misleading and this book helps people explain how the mechanics of the system work.”

Professor David Miles, Monetary Policy Committee, Bank of England

Modernising Money Cover Web 300px

Book: Modernising Money

Why our monetary system is broken, and how to fix it. 

“Money is a social invention, indeed among the most important of all social inventions. At present the right to create money has been handed over to the private businesses we call banks. But this is not the only way we could create money and, as recent experience suggests, it may be far from the best one. Read this book with an open mind and you will understand why.”

– Martin Wolf, Chief Economics Commentator, Financial Times

Further Resources

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Papers and videos from:

  • The Bank of England
  • The International Monetary Fund
  • Lord Adair Turner, former chairman of the UK’s Financial Services Authority
  • Other professors and experts in the monetary system

Find out more

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  • useful in parts

    um – to be useful doesn’t the graph need to show total amount of money created compared to some volume indicator to do with trade or commerce?

  • Camber

    In graph 1, it shows £2,213 bn of ‘created’ money against £67 bn of real money. What are the implications and impact of the ‘created’ money being loaned at an average of say 3% interest (£66 bn) which is almost identical to the amount of real money. Insolvency?

  • Joss

    Whilst Positive Money’s narrative makes sense, it leaves me with two questions which I don’t have answers for. If anyone can help, please do…

    1) Saying a bank lends £1000 to a customer, by putting a deposit in their account. That person then makes ten repayments of £110 each. The bank has made a £100 profit (in interest payments), which it then puts in its shareholders accounts. My question is this: Why doesn’t the bank just put the £100 in the shareholders accounts in the first place, if it can create money? Why does it go through all the hassle of getting a customer, which would cost time and effort in marketing and admin?

    2) If banks can just create money by putting it into people’s accounts, how did Northern Rock go belly up? Surely they could have just created money to make up their shortfall.

    • Antonio Tavares

      Hi. I’ve started as puzzled as you seem to be, but I can already answer to your
      question 1: They can create money, only when someone asks for it to the bank. Say, for example, that I need 10 million pounds to buy an hotel. The bank needs only the 10% of the “reserve fund”, 1 million in this case. The bank can go to the central bank and borrow it at 1% interest rate, or use their own money, whatever. Then they transfer 1 million to my account and they create new money, 9 million, so now I can use 10 million.

      • Joss

        Thanks :-)

  • Laurence James Howell

    This website does not explain how the people are ripped off. The Bank of England is a private enterprise and not owned by the UK Gov.
    It is the corruption within the system that is the problem. no one from this website will contact me to discuss what I have posted. My postings have upset the paradigm that is being promoted by this site so beware of websites that will not tell the truth.

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