Over the past few weeks, we’ve been busy meeting MPs from across the House of Commons. We’ve asked them to raise in Parliament how our monetary system is contributing to problems like the housing crisis and financial instability.
In particular, we’ve been asking MPs to table an amendment to the Bank of England and Financial Services Bill. It’s one of the biggest pieces of legislation relating to the Bank since the financial crisis, and we feel that the opportunity for a far-reaching reappraisal of the future of our monetary policy shouldn’t be missed. We’re calling for a commission to investigate the extent to which monetary policy produces good outcomes for the wider economy and society.
Our conversations with MPs have shown that we share a deep concern about the sharp and unsustainable rise in the level of household debt. The Office for Budget Responsibility has projected that household debt as a share of income will approach its pre-crisis peak in 2020, and the Bank of England’s Chief Economist Andy Haldane has warned that consumer credit has been picking up at “a rate of knots”. MPs report hearing from their constituents that even a small interest rate rise may make their borrowing costs unaffordable.
Positive Money supporters know that this problem is a product of our dysfunctional monetary system. New money enters the economy as banks make loans, and most of it goes towards consumer credit, mortgages and speculation of the financial markets. Only a small proportion funds investment in “real” economic activity which raises wages and generates sustainable growth. As asset prices rise faster than incomes, many people get left behind.
MPs from several parties have agreed with us that an independent, government-backed commission would be helpful in highlighting the growing threat that household debt poses to financial stability, and in investigating the extent to which monetary policy has made this problem worse. We hope to raise this issue during the passage of the Bank of England Bill.
Keep tuned for more updates.
We are calling on the UK government to set up a parliamentary investigation into the impact that money creation by commercial banks has on society.