How to fix the creation of money?

It seems clear that our banking system is fundamentally dysfunctional, yet for all the millions of words of analysis in the press and financial papers, very little has been written about the real reasons for this, reads an article in the Green European Journal, written by Ben Dyson.

Here’s a short extract:

Although there are many problems with banking, the underlying issue is that successive governments have handed the responsibility for creating new money to the private sector corporations that we know as banks. Today, almost all of the money used by people and businesses across the world is created not by the state or central banks (such as the European Central Bank, Bank of England or Federal Reserve), but by the private banking sector. Banks create new money, in the form of the numbers (deposits) that appear in bank accounts, through the accounting process used when they make loans.

Central banks maintain that they have the process of money creation under control, yet a quick recap of the debt-fuelled crisis of the last few years calls that claim into question. By handing the power to create money to banks, the state has built instability into the economy, since the incentives facing banks guarantee that they will create too much money (and debt) until the financial system becomes unstable.

You can read the whole article here.