Green Party 'gets it' on Monetary Policy

Positive Money is apolitical and doesn’t support or endorse any particular political party. However, I thought the Green Party’s policy document on money was well worth highlighting, as much of it is entirely consistent with Positive Money proposals. It is also by far the most detailed policy document I’ve ever seen from any UK political party.

Here are some key paragraphs, with our emphasis in bold:

[sws_blockquote_endquote align=”” cite=”Green Party Economic Policy” quotestyle=”style02″ link=”http://policy.greenparty.org.uk/ec#Monetary”]EC661 The world money supply has increased over the medium to long term. Almost all is created by commercial lending institutions. The resultant debts are an important promoter of economic growth and consumption, as well as instability. The emphasis in monetary policy will be to control and redirect the creation of money towards socially and environmentally sound areas of the economy, and away from unsustainable and consumption-driven areas. [/sws_blockquote_endquote]

[sws_blockquote_endquote align=”” cite=”Green Party Economic Policy” quotestyle=”style02″ link=”http://policy.greenparty.org.uk/ec#Monetary”]EC663 The current economic system enables commercial banks and other financial institutions to exert an unacceptably large influence on the economy. Their lending power should be reined in, enabling the emphasis of lending to be transferred to sustainable production.[/sws_blockquote_endquote]

[sws_blockquote_endquote align=”” cite=”Green Party Economic Policy” quotestyle=”style02″ link=”http://policy.greenparty.org.uk/ec#Monetary”]EC670 Mutual financial institutions are preferable to those owned by shareholders, since they are more likely to serve customer interests. The Green Party would provide financial incentives for governments at all levels to use mutually owned banks and financial intermediaries for their own business, and to encourage citizens to do the same. [/sws_blockquote_endquote]

Note in particular:   

[sws_blockquote_endquote align=”” cite=”Green Party Economic Policy” quotestyle=”style02″ link=”http://policy.greenparty.org.uk/ec#Monetary”]EC676 Since these restrictions on bank lending will severely restrict the money supply, the Monetary Policy Committee of the Bank of England will be instructed to monitor the need for increase (or decrease) in the money supply, based initially on maintaining the amount of money existing at the time of implementation of these measures. Criteria will be developed in the light of experience, aiming to avoid both inflation and deflation. It will accordingly instruct the Bank of England to create any supplement needed, on a monthly basis, and credit it to the Treasury to be spent by the government on projects that help society and environment. If the occasion arises that a surplus is threatening to cause inflation, the Bank of England will receive back and cancel an appropriate amount of money.[/sws_blockquote_endquote] 

This is entirely consistent with Positive Money’s full reserve proposals, with the caveat that we would rather see banks lose all of their ability to create money (rather than simply have it partially limited through the use of regulation).    

[sws_blockquote_endquote align=”” cite=”Green Party Economic Policy” quotestyle=”style02″ link=”http://policy.greenparty.org.uk/ec#Monetary”]EC677 The Bank of England will continue to be the institution for the regulation of the national currency and the setting of base interest rates. However, it will not focus on narrow economic indicators such as the rate of inflation, but instead will take a broader view on the impact of its decisions on the economy as a whole. Final decisions on the setting of base interest rates will be made by a democratically accountable committee made up of representatives selected from the different regions of the country.[/sws_blockquote_endquote]  

Of course, as with our draft bill it’s easier to get it on paper than to get it through parliament, but it’s encouraging to see that there is at least one party with an understanding of the monetary system and it’s effect on the economy.