The first letter in the Financial Times on Tuesday 3rd January 2012 was about the creation of money by private banks:
“Sir, In your editorial “Restoring faith in the banking system” (December 29), you rightly draw attention to the useful role played by banks in carrying out their “core activities” of “the payment systems and deposit-taking”. However, you make no mention of their other activity, namely the creation of new money in the form of commercial bank money.
“Many people would consider this to be far the most important activity of banks in the current banking system, accounting as it does for the creation of more than 97 per cent of the money in circulation (M4).
“If banks did not enjoy this extraordinary privilege it is doubtful whether they would have at their disposal the quantity of profits that makes the current bonus system possible.
Read the whole letter here.