Home » Consequences of… » Inequality
Because almost all of our money is ‘on loan’ from banks, someone has to pay interest on nearly every pound in the UK. This interest redistributes money from the bottom 90% of the population to the very top 10%. Meanwhile, inflated house prices and financial instability all lead to a growing gap between the poor and the rich.

1. The system distributes money from the bottom 90% to the top 10%

Because 97% of the money in the UK is created by banks, someone must pay interest on nearly every pound in the UK. The bottom 90% of the UK pays more interest to banks than they ever receive from them, which results in a redistribution of income from the bottom 90% of the population to the top 10%. Collectively we pay £165m every day in interest on personal loans alone (not including mortgages), and a total of £213bn a year in interest on all our debts.

Relative distribution of wealth drain from banking sector


2. It transfers money from the real economy to the banks

Businesses are also in a similar situation. The ‘real’ (non-financial), productive economy needs money to function, but because all money is created as debt, that sector also has to pay interest to the banks in order to function. This means that the real-economy businesses - shops, offices, factories etc – end up subsidising the banking sector. The more private debt in the economy, the more money is sucked out of the real economy and into the financial sector.

Real Economy Syphoning

3. It transfers money from the rest of the UK to the City of London

Banks pay their staff out of their profits, which in large part comes from the interest they charge on loans. Because most of the high earning bank staff work in the City of London, this results in a geographic transfer of wealth from the UK to those working in the City of London.

4. The instability that the system causes means that temporary and low-paid jobs are insecure

When banks cause a financial crisis the subsequent recession leads to an increase in unemployment. It tends to be low-paid and temporary contract workers who are the first to get made redundant, so that instability in the economy has a bigger effect on those on low incomes with insecure jobs.

5. High house prices increase inequality

When house prices are pushed up by banks creating money, those on low incomes suffer the most – they won’t be able to get a mortgage big enough to buy a house, so they won’t benefit from the higher prices. Younger people also lose out, as the cost of buying their first house swallows an ever larger amount of their income. Meanwhile, those who can get access to mortgages can buy multiple houses and thus benefit from the inflation in asset prices. In large part these people tend to be older and wealthier. This all increases inequality across different income groups and between the young and old.


The evidence compiled in this paper suggests that the current monetary system contributes to the growth of inequality through several channels.

If we want to tackle inequality, we need to change the way that money is created.

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  • Al-memani
  • plaintruthforidiots

    I can’t believe that you’ve actually written “more… THAT”, in the article above:

    “The bottom 90% of the UK pays more interest to banks that”

    It’s MORE THAN. Idiots.

    • pyromanos

      you are an asshole mate …. grow up or just get out of here !!!!!!!!!!!!!!!!!!

  • plaintruthforidiots

    ps Please stop using GREY TEXT, for god’s sake. You are breaking the law, (Disability Discrimination Act) by unnecessarily making your site more difficult to read for people with poor eyesight – well done.

    • Bartelemeus

      oh, grow up, its not like they intended to do that, and how can using only Grey text be discrimination, dont get offended too quick jeez

    • Jimbo

      How about writing to the contact address to ask something to be done ?

  • Bartelemeus

    you guys do have some points, but why do i want this, i mean, i am not realy worried about my money, so please tell us, WHY should we do this, explain how the economy will look like with your plan….

    • Jimbo

      There’s a simple why that should strike home. If the current system is pushed to it’s limits and the world financial system collapses one possibility is that your money becomes worthless. It’s losing quite a lot of value as it is with the money printing and inflation. That’s reason enough to demand that some sanity is brought back to this system that has created unimaginable amounts of hidden debt.

    • Jimbo

      Here’s a site with some infographics to get a gist of the current situation.

      • Bartelemeus

        thx for the site, it gives me some nice insight into the value of money ect ect …. ;)

  • Herman Martin

    Great video ….but a little disturbing

    I am a “Positive money” follower and when I try to explain these quite simple facts to other people, they just don’t believe me…?
    They say I’m a ‘conspiracy theorist’……get the word out more and keep hounding the politicians…….

    • Colin Smith

      Could not agree more. As PM says what gets taught is totally incorrect. Even telling people that we are all debt slaves, money is created digitally and not from savers, and we cannot reduce debt and have the growth at the same time, has them looking at me as though I am deluded.

      • Trevor

        Indeed. What i think is needed to cross a tipping point is for PM to team up with a media group who sells to Channel 4 or BBC2 who do documentaries that challenge the norm. Both parties will benefit as the subject matter affects all people. Even if it’s a Stacy Dooly investigates or conspiracy type.

        • Shirley Wardell

          It would be great to have PM on TV. In fact a whole QI episode on Money.

    • Jimbo

      Show them this video. UK IP might have a mixed reputation but these are the words of a representative.

      • Hedgehog

        SHAME !!

    • Shirley Wardell

      I know what you mean Herman. It is very frustrating. We all need to keep going, one conversation at a time.

    • catniss

      the biggest conspiracy theory of all is that there isn’t a conspiracy

    • Howard

      “Only the small secrets need to be protected. The big ones are kept secret by public incredulity.” ~ Marshall McLuhan

  • Happines

    As the UK column advocates bring back the BRADBURY pound / its money issued by the country and not by the banks and the fractional reserve banking system

  • Magnus Hellbom

    So there is a stream of money from people to the City of London. I guess the same happens in all other, well off countries. E.g. people stream money to those already rich in their own country. BUT is there a stream going from the banks in these countries to the City of London? Anyone knows?

    • Jimbo

      That’s an interesting question. The answer is that it’s probable. The big banks most likely prop up the smaller ones in some way and governments do invest internationally.

      So, for instance, one could imagine that there is a kind of stream going from the third world to the first world and that the financial shake ups in the west have direct repercussions the other way.

      • Orenstein and Keppel are Dead

        ” it’s probable”

        “most likely”

        “one could imagine”

        In other words, you have no idea.

  • Leo Bijl

    Most of the people don’t believe, don’t accept that banks create money out of nothing, while they have bougt their houses, offices, cars etc., real stuff… Oh no, yes you are a conspiracy theorist… Hold on and spread the word…and this video massively!!!

  • Philsopinion

    Thanks for your hard work.

    What does Positive Money think about interest AKA usury in general?

    Would Full Reserve banking not end up captured by the big banks eventually?

    Any thoughts on the insanity that is a mortgage (total repayments over twice the original amount borrowed)?

  • JW Beene

    “No more taxes!

    Assume that all Federal Reserve had used its greenback
    issuing power to buy back the entire outstanding federal debt, and that it had
    acquired enough bank branches (either by purchase or by FDIC takeover in
    receivership) to service the depository and credit needs of the public. What impact did these alterations have on the
    federal income tax burden? To explore
    these possibilities, will use U. S. Data for FY 2005 (the physical year ending
    September 2005), the last year for which M3 was reported:

    Total income taxes and FY 2005 came to $927 billion.

    Taxpayers paid $352 billion in interest. That year on the federal debt. If the debt had been paid off. The sensors could have been cut from the
    national budget, reducing the tax burden by that some.

    Total assets in the form of bank credit for all you
    capital. As capital. Commercial banks in F Y 2005 were reported at
    $7.4 trillion. Assuming in the average
    collective interest rate on the bank loans of about 5%, approximately $370
    billion or thus paid in interest that year.
    If roughly half the sound had gone to the new leaf form national banking
    system for loans made at the federal funds rate to private lending
    institutions, interest on credit card debt, loans to small businesses, and so
    forth the government could have earned around $185 billion in FY 2005.

    Adding these two adjustments together, the public tax bill
    might have been routed deuced by around $537 billion in FY 2005. Deducting this some from $927 billion lease
    $390 billion. This is the approximate
    sum, the government would have had to generate a new greenbacks to eliminate
    federal income taxes altogether and FY 2005.

    What would adding fit 390 billion due to the money supply
    and consumer prices? In 2005, M3 was
    $9.7 trillion. Adding 390 billion would
    have disbanded M3 by only 4% Milton Friedman’s modest target rate and far less
    than the money supply actually grew in 2006.
    This was the year the Fed quick reporting M3, but the figures have been
    calculated privately by other sources.
    Economist John Williams has a website called shadow Government
    statistics, which exposes and analyzes the flaws in the current US government
    data, and reporting. He states in July
    2006, the annual growth in M3 was over 9%.
    We’ve seen that this growth must have come from Fiat money created but
    as loans by the Federal Reserve and the banks.
    Thus, if new debt-free greenbacks had been issued by the treasury
    instead inflation of the money supply could actually have been reduced from 9%
    to a modest 4% without cutting government programs are adding to a burgeoning
    federal deficit.”

  • Geraldine Mitchell

    It isn’t a coincidence that usuary, ie charging interest on loans is condemned in Vedic texts, in both the Old and New Testaments, in Buddhism and Islam. The Romans allowed it but only with carefully restricted interest rates. Its a practice which has been universally condemned over time. “God permits commerce, and prohibits usuary. Those who persist in usuary, they incur Hell, wherein they abide for ever.” Qur’an.
    We are now living in world where usuary is normal practice. Most societies and religions condemn the practice of allowing money to make money because it is obvious that those who have it will continue to get ever richer without contributing anything of worth to that society. Its about time Christians et al stopped being obsessed by one small abomination re sexual practices, and started to publicly condemn a God forbidden system, which is leading us all into hell metaphorically anyway.

    • Orenstein and Keppel are Dead

      “Its a practice which has been universally condemned over time.”

      A silly statement. Many people might have condemned the practice over time. But not all people. so “universally” is wrong.

    • Veri Tas

      Trouble is, god was wrong. The people incur hell; the banksters are in 7th heaven.

  • Margot

    Hmmm – I was at the bank the other week to talk about my mortgage. The friendly assistant kept refering to ‘the people who lent you the money’. I so wanted to say – you do know that there are no people who are lending me money – you created the Money when I took out the loan. Next time I will and if he tells me its not true, then I will ask to be personally introduced to those kind people who are lending me Money.

    • Orenstein and Keppel are Dead

      Don’t forget to wear your tinfoil hat when you visit.

  • Orenstein and Keppel are Dead

    “Banks pay their staff out of their profits, which in large part comes from the interest they charge on loans.”

    Wrong. Profit is revenue minus costs. Those costs include salaries and bonuses.

    If you can’t get basics like that right, why should anyone take the rest of your arguments seriously?

    • GWHodgson

      Fair point. Banks pay their staff out of their revenue. They pay their shareholders out their profits.

  • Orenstein and Keppel are Dead

    “Because most of the high earning bank staff work in the City of London, this results in a geographic transfer of wealth from the UK to those working in the City of London.”

    You’re confusing investment banking with commercial banking.
    The highest-paid bankers work for investment banks.
    Investment banks make money from fees from doing deals, not charging interest.
    Again, if you can’t get the basics right, why should anyone take the rest of your arguments seriously?

    • jamal

      Actually you’re the one who are clueless about banking. Since the deregulation of banking sector in the 70s and 80s there are no more separation between commercial and investment banks

  • Orenstein and Keppel are Dead

    Key Stats Inequality
    % household income transferred to banks through interest payments is 9.4 % for the poorest income group decile and 1.4 % for the richest income group decile.

    –> Where is your source for this?

    • GWHodgson

      Original research by Positive Money in the course of preparation for publication. Bank income and expenditure from BoE stats for 2005 was distributed over households grouped by household income on the basis of reported levels of debt, savings, investments etc in the 2005 wave of the British Household Panel Survey 1991-2008

  • AfricaMan

    If they remove the ability to lend everybody will die. Literally. 95% of companies will go bankrupt. With no transport companies in operation the shops will go empty. Oil companies will not drill….= no fertilisers etc etc.
    Note: Religion always illegalised usary (interest) because it would mean they would lose their power. Churches thrived in feudal times when people had to knock on their door for food and “donate” accordingly their own surplus crop. It was worse than the current system, many starved.

    In contrast lending enables people to invest. Farmers can buy seed and equipment.. and food is produced, people can buy the food because they have jobs with companies that only exist becasue they too can borrow money.. All this meant the church loses it’s power….. yes the bankers won over the churches… but when you look at the difference in standard of living between religious-politicial countries and usary systems it is clear which is better for mankind.

    I completely disagree with that video and positive money.

    • some10

      Lending will not be prohibited. Lending will continue. But since we (the banks) are lending money that is created out of nothing, we will assume the newly created money really belongs to the society and not the existing capital owners. Therefore interest will be paid to the society, not the capital owners. This will help create a balanced distribution of wealth. If we were 4 people on an Island, and created money to commence economic activities, we would share that money equally. We would not hand it to one banker guy and tell him to loan it to us on interest. But that is what we are doing today!

  • jkelvynrichards

    Let us see what others think of these facts. The World Wealth Reports have revealed that in 2013 there is a world population of 7.18 billion people. There is an estimated global GDP of $75trillion, There are 12 million HNWI who have access each year to $46.2 trillion including 1426 billionaires with $5.4trillion. This means that more than 7 billion people, or about 99%, have to share $28.8 trillion, whereas 12 million, or 1%, share $46.2 trillion. Now, we may argue about how wealth is distributed, and why. But we cannot deny that the majority of the world’s population are poor. [I would be grateful if someone could calculate the per capita incomes] How can your friends justify a system in which most wealth goes to a tiny minority? and indeed has always done so! What we need to know is how much of the $46.2 trillion is created out of nothing?

  • Michelle Thomasson

    Money is simply a concept. The ability to be able to trade, buy or sell has always been based on an accepted currency, something that had cultural value, therefore back in time it may have been bags of salt, ivory tusks, diamonds, gold coins etc. the fact that our concept is now based on imaginary negative electronic integers owned and manipulated by a minority may be hard to swallow but it causes massive instability and injustice. Thank you for this latest video Positive Money.

  • James

    The more fundamental issue, which Positive Money points to, is that money is simply unethical. You use it and you literally harm other human beings and put them into debt or poverty at worse. Marx was right and the more and more you read these Positive Money websites, the more you see that gee, maybe we shouldnt be fixing capitalism, maybe we should be fixing communism and figuring out how to create a sustainable system built around sharing and shared, democratic work.

    • Castilian

      But I don’t want to share. In fact there are loads of different groups that I would like to kick in the goolies – metaphorical or otherwise. I’d rather chew my arm off them bust my gut for them.

      Besides you idea has been tried and it didn’t work – because there are always those who are ‘more equal than others’ and the rest have no incentive to do anything.

  • MM

    Here’s some more information about this petition:

    Globalism and technology have translated into record profits,
    offshore bank accounts, lower taxes, and cheaper labor for America’s
    companies. American workers are more productive than any other time in
    history. Yet, our wages have stagnated for decades. Simply put, the
    lower demand for labor has allowed employers to reap their deserving
    benefits. Though, as we move forward into change and establishing order,
    we must take steps to preserve capitalism for the future. To accomplish
    this, America must do as it has done before by making work fair and
    prosperous for all. Please support non-exempt status for all. This will
    help liberate the salaried employee from an overworked unhealthy
    lifestyle; so that, we can give these hours to those who are desperately
    seeking work.

  • adrian

    So if a public institution would have the power to create money wouldn’t it be controlled by the same 1% who also happen to be in political power?

    • some10

      When the principal is paid back, it will be destroyed just like today. When interest is paid back, it will be spent for public services by the government. If the rich has power over government, yes they can exert control over how government spends it. However, there is a bigger and sinister problem that many are not aware: the current debt based monetary system gives the rulers of this world the power to gain control of their competitors. They have already gained control of everything. To get an introduction, please take the time to read the “Debt Based Monetary System” section here:

  • adrian

    I think inequality should exist, some people tried to remove it from society – it was called communism and it didn’t work. But I think the problem is that you have less and less chances of rising up the social ladder, there is less upward mobility for young people from the middle class and poor end of society. In an ideal system you should be rewarded based on your value to society, not on the basis of how rich you were born.

  • Richard Ogden

    And yet the poor still have 50 inch TVs and Sky subscriptions, the young feel sufficiently wealthy to borrow tens of thousands to pay for gardening and media degrees.

    There are choices being made by individuals in all this and crashes hurt the poor too.

  • Denis

    I follow and understand the basic argument that banks create money through debt but it is not therefore true to depict the banks as the owners of all the money. Each £1 they lend is an asset in their books but it is matched by a liability of the same amount. What the bank owns is its net equity or net worth = to its capital and reserves.
    Lloyds TSB’s 2012 balance sheet shows total assets of £924 billion, liabilities of £880 billion and capital and reserves of £44 billion. It receives interest on the assets and pays interest on the liabilities.

  • RV

    Am I correct in thinking that you would want to scrap tax payer funded guarantees of amounts deposited in bank accounts? What would be your alternative for people to save money with zero or low risk?

  • John Pablo
  • Amanda

    There is an error here in that you have implied that only the debt backed money system causes inequality. You say this is because the bottom 90% pay more interest to bank than they ever receive from them. However in a 100% reserve system, 90% of people will still need loans and pay interest while 10% will still not need loans and collect interest. It is the interest that fosters the inequality, not the debt backed money per se.

    • some10

      In a debt free monetary system where new money that is created out of nothing belongs to the people, the interest paid for that money will also be shared by the people equally. It will not go to the richest capital owners. This is why there will be great opposition by the rulers of the world to change the system.

  • Larry

    hey every time I wanna sign the page goes out n its not my internet, can anybody help? thanks!

  • Larry

    I get this error message everytime I wanna sign…

    Server error

    The website encountered an error while retrieving It may be down for maintenance or configured incorrectly.

    Here are some suggestions:

    Reload this webpage later.

    HTTP Error 500 (Internal Server Error): An unexpected condition was encountered while the server was attempting to fulfill the request.

  • charly

    I am interested in the positive money approach. I have also been interested in the possibility of creating a money free system. But I understand that there may be problems with this due to the need to calculate economic costs in order to facilitate economic activity. This is known as the Economic Calculation Argument that I really don’t understand very well.

    I would be interested in knowing why you support a positive money system rather than a money free system.

  • Richard

    I am a supporter of Positive Money but I think they seriously need to change the way these articles read.
    If the uninitiated read this they would think that under the system advocated by Positive Money they would not have to pay interest.
    That is not the case and PM need to stress that the citizens would still need to pay interest to borrow money but government would not have to borrow money and we would pay less interest because we would not be collectively funding a national debt as it would gradually be paid off.

  • Lynne Noble

    A little disturbing!?! A lot disturbing!

  • Lynne Noble

    Hey People, lets not argue amongst ourselves, while the rich get richer. Lets use this place to help educate each other.

  • Walther Micke

    What about the money of mortgages which is paid to the building industry as partb of the real economy?

  • some10

    The Matrix is real folks: Debt based monetary system is a tool that keeps masses under control along with the media and the education system. People in debt, people who struggle to earn their daily bread cannot find time to think about how bad they have it! They don’t have time to learn the intricacies of the system that screws them everyday! It is by design!

  • chris gardiner

    Ultimately all money has a personal owner. They are “King Midas” clones. Reduce inheritance to £1,000,000 and the problem is solved. Worried for your children? The opposite would make sense. What sort of equality says your children should have an unequal start in excess of £1,000,000. David Cameron wants to raise the start point to £2,000,000. What I am suggesting is dynamite.

  • chris gardiner

    Hi folks. I had a screw up with Disqus which stopped me seeing this thread of discussion till this minute which I find most enjoyable.
    I obviously hit on something.

    Economists in my view talk a lot of mystical hocus pocus.

    I have a simple image that money can only go in peoples pockets. Banks are mechanisms for taking money from you pocket and putting it in someone else’s.

    As I said inheritance needs a firm lid on it.

    Did you know for instance that the Tate family made money in sugar and the slave trade about 200 years ago.

    Now their great great great great grandson has a suite in several of the most expensive hotels in the world. By living in hotels he does not have to do anything at all.

    When you think about it there is no easier way. According to the manager and staff of Claridge’s he is a lovely lovely man. He is what I would call an inheritance scrounger.

    At the other end of things when I grew up a British Motor Corporation Factory worker made 20 cars a year (averaged out). Now a Nissan car worker makes 400 cars which last three times as long. That means a car should be 60 times less of a burden. Even if my numbers are a bit out there is something up the spout. I mean what was a years wages should now be a weeks wages. If only.

    Perhaps more significantly going for growth is a busted flush. We do not need 800 cars per worker. There is nobody to buy them. Equality of opportunity needs to have more equality at birth. Stick the following paragraph in your pipe and smoke it ====>

  • Andrew Rabbitt

    The interest due on debt money has only become problematic because western economies have become dependent on debt-financed consumption. The GDP these economies represent is powered by money creation rather than money circulation (velocity), largely because countries themselves have become indebted by allowing large trade and current account deficits to develop – this is the nation collectively borrowing to finance a standard of living beyond that which its prepared to create for itself – hence the declining velocity of money.

    To put it another way, if citizens were trading with one another rather than net importing to meet their collective needs, more GDP would happen with a lower overall money supply required. The interest burden of this debt money, being a direct function of the total money supply, would be a much smaller and more easily borne burden for the population to bear.

    Financialization of our lives has allowed us to easily live beyond our means for a time, but has also turned the debt-nature of money into a curse.

  • charles allcock

    consists of real assets such as land, buildings, goods, and all types
    of commodities and proper money (gold and silver). This real wealth
    gets into the possession of the group who have been given the right
    to produce paper and electronic money for practically zero cost. It
    enables them to put more money into circulation causing a boom with
    inflated prices fuelled by credit, then reduce the quantity of money
    in circulation. Those who have borrowed to buy assets now have to
    sell them at pennies in pound and they are then scooped up by those
    who can simply print off the amount required to purchase them. That
    is why this privileged group are almost at the point of owning
    everything. The wall street crash for example was probably the
    largest transfer of wealth to the top, ever.

    game of monopoly ends when one player owns all the property.

    this reason it is required that the government should not give the
    right to produce money to private groups and individuals, but to do
    it themselves.

  • Stephen Stillwell

    I suggest a structural change that requires sovereign debt to be backed with Commons shares.

    In this way, when most money is borrowed, the interest is divided among the entire adult population, as part of an actual social contract.

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