For decades we’ve allowed the power to create money to be used to blow up property bubbles and financial markets. Now it’s time to use that power in the public interest, reads The Ecologist, 22nd May 2014
Here is a short extract:
But there are different ways of creating money. Positive Money have advocated using ‘sovereign money’ to boost the real economy without relying on increasing national and household debt, and further bank lending.
Under current Treasury rules, when the Government wants to spend more money than it is pulling in in taxes, it has to borrow the money on financial markets – and then pay interest on it. It’s a great deal for the banks, who create 97% of that money out of thin air – but rather less good for taxpayers who have to service the debt.
Sovereign money uses the Bank of England’s power to create money (as it does with QE) – but instead of putting the money into financial markets, it advances it to the Government, which can then spend it in the real economy.
The government can use the money in three ways: direct spending on capital projects such as housing, infrastructure, green technology; tax cuts; or citizen dividends, where everyone gets an equal share of the new money.