The following letter from Positive Money supporter Christopher Gilfedder, was published in the Glasgow-based newspaper, The Herald, on 19 May 2012:
I appreciate Richard Mowbray’s point about irresponsible and dishonourable governments (Letters, May 18), but where on earth did he get the idea that the state is the monopoly supplier of money?
If this is so, why do governments need to borrow from banks?
More than 97% of all money in circulation is created by banks in the form of interest-bearing loans. As an example I quote from the Bank of England Quarterly Bulletin, 2007: “By far the largest role in creating broad money is played by the banking sector … When banks make loans they create additional deposits for those that have borrowed.”
The more people and the Government borrow the more new money is fed into the economy. When banks begin to ration out loans the economy is starved of money.
It is naive in the extreme to expect bankers to reform the system by which they enrich themselves. Even the moderate and limited proposals of the recent independent commission on banking are being resisted.
What we need is a money-creating body, transparent and accountable to Parliament, that is independent of bankers and politicians – both have shown themselves to be, in different ways, untrustworthy and incompetent.
If anyone doubts the assertion that banks create the nation’s money I suggest they write to or email the Public Information and Enquiries Group of the Bank of England, Threadneedle Street, London.