After 170 years of silence from the House of Commons on the subject of money creation, there was finally a debate in the Main Chamber at the House of Commons on the subject of ‘Money Creation and Society’ on 20th Nov 2014.
During the debate we heard 8 speeches from: Steve Baker MP, Michael Meacher MP, Peter Lilley MP, Austin Mitchell MP, Zac Goldsmith MP, Mark Durkan MP, and then from the shadow front bench, Catherine McKinnell MP, and the government Andrea Leadsom MP.
There were also questions from a further 12 MPs. Additionally, more than 15 MPs came to the debate and listened, but did not speak. Many MPs did respond saying they would have liked to have been there but due to prior commitments or having to be in their constituency they couldn’t be.
We were really pleased with the level of debate, the points raised, and the collaborative atmosphere. Whilst it took a lot of effort to make MPs aware of the debate and willing to attend, it was definitely a worthwhile awareness raising exercise.
It was always going to be difficult to get MPs to attend. We know that many MPs don’t understand how the money system works and so clearly would be not too comfortable discussing these issues in front of a TV camera! The MPs that spoke were self-selected so the level of debate was high. MPs only spoke if they felt confident enough to talk about the topic, therefore, only MPs with some knowledge spoke. It is clear many MPs in the Chamber were simply there to learn. However, even those who spoke were willing to admit that they have limited knowledge, and that this is a problem:
As Zac Goldsmith MP highlighted: ‘this issue is not well understood by members of the public….it is also not well understood by Members of Parliament. I would include myself in that. I suspect that most people here would be humble enough to recognise that the banking wizardry we are discussing is such a complex issue that very few people properly understand it.’
He went on to discuss how that is a problem: ‘how on earth can we be confident that the reforms that we have brought in over the past few years are going to work in preventing repeated collapses of the sort that we saw before the last election? In my view, we cannot be confident of that.’
The debate did lead to some really fundamental questions being asked about the problems with the economic system we have.
Steve Baker MP stated: ‘We are in a debt crisis of historic proportions because for far too long profit-maximising banks have been lending money into existence as debt with too few effective restraints on their conduct and all the risks of doing so forced on the taxpayer by the power of the state.’
‘Money is not neutral. It redistributes real income from later to earlier owners—that is, from the poor to the rich, on the whole. That distribution effect is key to understanding the effect of new money on society. It is the primary cause of almost all conflicts revolving around the production of money and around the relations between creditors and debtors.’
Austin Mitchell MP stated that ‘This House and the Government are obsessed with money and the economy, but we never debate the creation of money or credit, and we should, because, when it comes to our present economic situation and the way the banks and the economy are run, that is the elephant in the room. It is time to think not outside the box, but outside the banks; it is time to think about the creation of credit and money.’
There were no front benchers engaged in the debate, apart from the 2 representatives that had to give responses. To engage publicly in this debate would be to engage with the underlying problems of our economic system, and current fiscal and monetary policy. That is not a step any of the mainstream parties are willing to take yet.
Micheal Meacher MP laid out his full support of the creation of a ‘sovereign money system’ explaining how putting the power to create money back in the public interest would address 5 points: ending too big to fail, increasing economic stability, lending to productive investment, damping house price bubbles and reducing wealth inequality, and finally redressing the democratic deficit of the current banking system. He finished his speech by calling on the Government to set up a commission on money and credit, with particular reference to the potential benefits of sovereign money.
Establishing a commission to look into money and credit was supported by Zac Goldsmith. Andrea Leadsom, the Economic Secretary to the Treasury, suggested that the Treasury Select Committee (TSC) could look into this. The Positive Money team will be pushing for this with TSC members to ask them about their support for a commission. The news that Andy Haldane, the chief economist at the Bank of England, will be commissioning heterodox economics research was praised during the debate.
What we would like you to do next
Money creation is likely to be forgotten about in Parliament unless we keep it on the agenda. We need to keep raising the debate and highlighting how the current system causes high house prices, rising inequality and financial instability. Next year the general election will take place, this provides an opportunity to ensure our MPs are listening and representing the concerns of their constituents.
Is there a Positive Money local group in your area?
Could you organise a meeting or an event with your MP and potential candidates on this topic?
The Positive Money local group in Hackney recently organised an event on Housing and Money Creation. It was attended by over 100 local residents along with their local MP Diane Abbott and councillor Philip Glanville, Hackney Cabinet Member for Housing. You can read more about the event here.
Positive Money meetups and events are being held across the country. There are lots of opportunities to get more involved, talk about these issues and start taking action. If you are interested in organising an event in your local area, joining a local group or starting a new one, please email Dora@positivemoney.org
Watch the highlights from the debate (1 hour):
(If you can’t spend 1 hour, make sure you watch at least this 12 minute video.)